Corporate Boards Taking Steps to Promote Diversity
Acknowledging the value that comes with a diverse board, a majority (75%) of corporate boards in the U.S. are taking a broad range of actions to promote diversity in the boardroom, from instituting diversity policies to asking executive recruiters to recommend diverse candidates.
The insights were revealed in a survey of corporate directors undertaken by Corporate Board Member magazine and Spencer Stuart, one of the world's leading executive search consulting firms with a strong commitment toward promoting diversity in the boardroom, having placed more than 550 female directors in the U.S. It appears that the basis for the directors' actions is mostly self-driven. Only 11% of those surveyed reported having shareholders approach the company within the last three years about increasing race and/or gender diversity on the board.
Responses revealed that the three most common diversity initiatives were asking search firms to provide diverse candidates (63%), proactively including boardroom diversity as a board meeting agenda topic (56.5%) and instituting a board diversity policy (50%). Less than a majority (42%) required a diverse slate of candidates for every open board seat.
"Lack of turnover in the boardroom is a contributing problem," said Julie Daum, co-leader Spencer Stuart North American Board & CEO Practice.
Supporting this point, 58% of those surveyed said the SEC rule that requires companies to disclose their policy on boardroom diversity will have a positive impact on promoting it.
In terms of the effectiveness of these actions, the 181 respondents reported that a general board diversity policy and asking search firms to include diversity criteria worked moderately to very well - 62.7% and 57.6%, respectively. Only 45.6% of respondents reported that a diversity requirement for open board seats worked moderately to very well.
The survey also questioned directors on what they perceive as challenges in their diversity efforts. The majority (72%) pointed to the challenge of balancing all the interests at hand with those they believe are most important when looking to fill a board seat and responded that "other qualifications are more important than diversity." Almost as significant a hindrance is the fact that many directors perceive the diverse candidate pool to be too small. More than half (57%) of directors surveyed say there is a lack of qualified diverse candidates available.
The survey also took board members' pulse on the topic of current government regulation and the need for future government intervention. Two-thirds of directors surveyed believe boardroom composition—and decisions on diversity—should never be mandated. Thirty-two percent of directors surveyed agreed that diversity efforts are better served through voluntary actions, but conceded that mandates may eventually be necessary to affect real change in the United States. Only a sliver of respondents (1%) were pro-quota—checking the box to say the U.S. should follow the lead of other countries and mandate diversity quotas.
While there appear to be strong views in the U.S. against government-imposed quotas or legislated mandates, governance observers closely watch the impact of those actions in Europe. "Research consistently shows that U.S. companies don't want or think that board diversity quotas implemented in several European countries are needed. I worry that if more companies don't embrace this inevitable social change of having company workforces and boards more closely resemble the markets and customers they serve, then we're likely to see increased pressure for a mandated change," said TK Kerstetter, president of Corporate Board Member.
The survey was sent to 697 directors on the Corporate Board Member Research Panel and 1,850 Governance/Nominating committee members and chairs of U.S.-based public companies. Eighty-four percent of respondents identified themselves as outside directors of their companies and 79% reported that their company's revenue size was less than $5 billion annually.
Corporate Board Member, a NYSE Euronext company, is the leading information and education resource for senior officers and directors of publicly traded corporations, large private companies, and Global 1000 firms. Spencer Stuart is one of the world's leading executive search consulting firms.