One-off craze or trendsetter: Is boardroom diversity here to stay?
July 29, 2021
While inequality permeates every nook and cranny of our lives, in 2020 it reared its ugly head. The Covid-19 pandemic and the killing of George Floyd have thrown socio-economic inequalities into sharp relief. Luckily, this time the conversation has climbed from the streets to the upper floors of corporate glass buildings.
Recent reports released by ISS Corporate Solutions and Heidrick & Struggles found that the number of African-American directors on corporate boards at large US companies has grown exponentially since the murder of George Floyd last year. According to Heidrick & Struggles’ annual US Board Monitor report, in 2020 28% of newly appointed directors in Fortune 500 companies were Black, up from 10% in 2019. Meanwhile, Latino directors represented 7% of all new appointees, up from 3% the year before. Though new Black directors represented more than double their demographic share, at 13.4%, Latino and Hispanic representation lagged far below the estimated Latino population of the US, at 18%. The lagging of some under-represented groups in corporate boardrooms may leave us wondering if all barriers are being lifted for workplace inclusion. We will have to sit and wait until 2022 to see how this year’s appointments unfold.
Yet, signs are cropping up that pressure on companies for board diversity will intensify. Beginning in 2022, the large index fund manager State Street will vote against the chair of the nominating and governance committees of companies that do not have at least one minority board member according to nationally appropriate reporting frameworks; a threat that will apply to all companies in the S&P 500 and FTSE 100. The announcement follows a similar move from Goldman Sachs in the financial industry. Additionally, stock exchange operator Nasdaq is considering requiring all companies listed on its exchange to have at least two diverse directors on their boards – in categories spanning gender, race, nationality and sexuality – pending Securities and Exchange Commission (SEC) approval. Firms have also started efforts to put disability inclusion on boardroom agendas, with 500 global companies agreeing to publish quarterly reports into disability representation as part of the Valuable 500 global disability network.
Such moves are encouraging and look to be long term, encompassing several under-represented groups and seeking to hold corporate head office accountable for its actions, with a view to long-term systemic change that influences future hiring outcomes and enriches organisations.
Time will tell whether the sudden escalation of appointments of Black directors and actions to represent minority groups on company boards and work floors, is a sign that the needle has moved on workplace diversity, or rather a cynical example of corporates catering to the public zeitgeist. I am hopeful it is the former.
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