New Front for Board Diversity Measures

Women, once a rarity on corporate boards, have made real gains in recent years following concerted campaigns by big investors to increase gender diversity and state legislation that set targets.

Now, after the nationwide Black Lives Matter protests spurred by the killing of George Floyd by Minneapolis police, the racial makeup of boards is getting a closer look, too.

Mike Magsig, who leads the board- and CEO-search practice at executive recruiting firm DHR International, says he received half a dozen requests in the weeks after the Floyd protests from boards looking for help diversifying. Barry Lawson Williams, 76, who recently retired from the last of 14 public company boards after almost 40 years of service, said he too has been getting more requests to help companies find Black directors.

“I wish I could say that having any minority is fine, but I can’t,” said Williams, a former lead director at PG&E Corp. “The number of Black directors has declined, and I put a spotlight on a Black director for that reason.”

Companies are showing signs of responding to pushes for more racial diversity, too. In the past month, Procter & Gamble Co., Bristol-Myers Squibb Co., and Nvidia Corp., have all added a Black director.

Little hard data is available about the racial composition of America’s corporate boards. Public companies don’t have to report the race of their directors, and until recently having a woman often was enough to appease those pushing for more variety. But about a dozen of the largest companies by market value in the S&P 500 Index have no Black board members, according to data gathered by Bloomberg News. That stands in contrast to those that have women directors; last year, the final all-male board of a company in the S&P 500 Index went extinct.

More critically, the number of Black corporate directors has stalled or even declined. Although about 10 percent of directors at the 200 biggest S&P 500 companies are Black, the percentage of Black executives joining boards fell to 11 percent in 2020, from 13 percent the year before, according to executive recruiting firm Spencer Stuart Inc., the firm says.

Among the largest companies in the S&P 500 without a Black director are TJX Cos., Philip Morris International Inc., Qualcomm Inc.,  Cisco Systems Inc., Adobe Inc., Automatic Data Processing Inc., Broadcom Inc., Fiserv Inc., Intuit Inc., and ServiceNow Inc.

Of those that confirmed they lack Black representation, nine cited efforts to improve diversity and pointed to progress in other areas, including the presence of women and other people of color on their boards. Oracle Corp., Danaher Corp., and Intuitive Surgical Inc. didn’t return repeated calls and emails seeking comment about their board makeup. Oracle was singled out last year by a group of U.S. lawmakers for lacking a Black director.

If the progress for women in the boardroom is any indication, further gains may require stepped up outside pressure from activists, the large money managers that own shares in most of the country’s biggest corporations, and government mandates or legislation.

BlackRock Inc., Vanguard Group Inc., and State Street Corp., the three biggest asset managers, began pressuring companies and even voting against sitting male directors at companies with boards made up only of men. Women—most of them White—now hold 28 percent of all board seats at major corporations, according to Bloomberg data.

These same firms have all said that while they’ve pushed for racial and ethnic diversity in the past, they’ll keep the pressure on companies this year.

Perhaps the biggest uptick in female board representation came after California required all companies based in the state to have at least one woman director by the end of last year and three by the end of 2021. Women accounted for almost half of new board seats in the state last year.

Now California lawmakers have proposed a law mandating at least one person from an underrepresented group—Black, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native—on boards of companies based in the state by 2021, with the requirement increasing in 2022. If passed, it would be the first such mandate in the United States.

“Boards have given highest priority to meeting the diversity goals that they have by having a woman director,” said Risa Lavizzo-Mourey, a medical doctor and professor of medical ethics and health policy at the University of Pennsylvania, who sits on the boards of Intel Corp., General Electric Co., and Merck & Co. “Ensuring that there’s a person of color, or a Black director, has not had the same priority.”

Increasing Black representation, however, poses challenges that adding women may not: Most of the women elected to boards are White, selected because they had professional connections with the White men who still dominate boardrooms. Similar networks between White corporate leaders and potential Black directors are less well-developed.

“When it comes to gender, it’s always been closer to home, because everyone knows a woman,” said Mary Winston, who sits on five boards, including at Bed Bath & Beyond Inc., where she served as interim CEO for six months last year. “In White America, I don’t know that everybody even knows a Black person.”

The most direct pipeline to a board seat is the C-suite, and because most top executives are White and male, boards historically tended to lack diversity. There have only been about a dozen Black CEOs of major corporations over the past two decades, and Black people hold fewer than 10 percent of the jobs most likely to lead to the C-suite at the largest U.S. companies, a 2019 report found.

“Most board members get their seats because of the network,” said Jocelyn Carter-Miller, who is a director at advertising giant Interpublic Group, Principal Financial Group Inc. and security company Arlo Technologies Inc. Like Winston, Carter-Miller works with the National Association of Corporate Directors (NACD) to try to increase board diversity. “It takes somebody pushing from the inside.”

Even without investor pressure or legal mandates, boards probably will continue stepping up efforts to find Black directors, said Julie Daum, who leads the North American board practice at Spencer Stuart. “Diversity is not going to mean you need to have different kinds of people in the room,” she said. “There will be a focus on African-Americans.”

— With assistance from Anders Melin, Marin Wolf, Andrea Vittorio, Ian King, Nico Grant, Michelle Cortez, Jordyn Holman, Jennifer Surane, Riley Griffin, Corinne Gretler & Gerald Porter Jr.

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