Editor’s note: Serial entrepreneur and investor Donald Thompson is a regular contributor to WRAL TechWire. His columns appear on Wednesdays.
RALEIGH – I am a habitual board member. I’m also a Certified Diversity Executive. So this month as I take on a few more seats, joining the boards of the Raleigh Chamber, Vidant Medical Center, and TowneBank Raleigh, I’ve been thinking a lot about board diversity, what makes a quality board and why it’s so hard to move the needle toward greater inclusion in the boardroom.
Don’t get me wrong. It is an absolute honor to accept these appointments and I am eager to make a difference however I can, but I also feel keenly aware of the larger leadership diversity problem. Can you really have a successful board if you don’t have diversity of thought?
Everything we know about diversity, equity and inclusion (DEI) proves that companies with diverse boards simply perform better. They have higher revenue, higher talent retention and higher productivity. They make stronger, faster decisions and show greater innovation. Yet, across America and in North Carolina specifically, corporate boards are overwhelmingly white and male, according to reports from Harvard Law and UNC Chapel Hill.
We are late to the game
The last decade has seen a global push for corporate board diversity, mostly through legislation and mandatory quotas. In 2012, the European Commission proposed a 40% goal for women in board positions in all publicly listed companies. With no similar federal legislation in the U.S., California and Colorado led the charge from a state level with a handful of other states following suit.
Finally, the private sector is joining the movement, prioritizing internal diversity and sometimes even penalizing the companies they work with for not doing the same. Early this year, Goldman Sachs made waves by announcing they would not go public with companies that did not have at least one diverse board member. That’s such a small ask; just one diverse board member! Still, the numbers are disheartening.
What it looks like for women and people of color
Women — who make up more than 50% of the U.S. population and 56% of U.S. college graduates — hold only 27% of board seats in the S&P 500. Women of color face even more daunting numbers, comprising nearly 18% of the general population but holding only 4.6% of board seats in the Fortune 500. Research from Catalyst shows that “women need to hold at least three board seats to create a ‘critical mass,’ which can lead to better financial performance” and that “reaching critical mass can change boardroom dynamics substantially, creating an environment in which innovative ideas can spring from gender diversity.”
I would argue the same point regarding culturally diverse and underrepresented groups. Inviting more diverse identities into the boardroom will change the dynamics of leadership from the top, but we cannot be invited as tokens of diversity. Real change requires critical mass.
Let’s pick up the pace
Business and life are not separate bubbles; they are deeply interconnected. Especially in this year of economic uncertainty, with such a bright spotlight on racial inequity, companies who reflect the communities they impact will be better equipped to handle challenges and survive change. Otherwise, we’re not only missing out on talent but missing out on the diversity of thought, experience, and perspective that make us sustainable, innovative and successful. Corporate boards seem to be moving in the right direction but far too slowly. Here’s how I think we can move forward faster.
Consider your sources
The most common way to recruit new board members is to ask for referrals and recommendations from current board members and CEOs. Yet we know that most people predominantly socialize within their own gender, ethnic, economic and generational groups. That means, using personal and professional networks as a recruitment tactic will only perpetuate the status quo of white, male boards.
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Where are you finding new board members, and how can you expand that search so that you can reach more diverse board candidates? Consider a partnership with your local chamber of commerce, community leaders, advocacy groups, or colleges and universities with MBA and executive education programs. Keep an open invitation for resumes on your website, and note that you are always looking for future members, even those who may not have previous experience.
Create a talent pipeline
Attracting great talent should be a strategic imperative long before you have an opening on the board. Do your homework to proactively widen the search for new members. Create a Board of Advisors or a small group of non-voting Board Observers who can help to expand diversity of thought.
The number one excuse I have heard from my colleagues is that people with little to no board experience need much more guidance and formal training about board responsibilities and compliance. So maybe you can’t find perfect candidates; train them up instead! Board Observers and Advisors become your first-picks for full board membership. They gain experience; you gain their advice as they grow into valuable consultants.
Look beyond gender and ethnicity
Good leadership also requires that we look beyond the narrow traditional definition of gender and ethnic diversity to account for socioeconomics, age, expertise, and more. Does your board include employee representation? And not just as a form of tokenism but in a way that can actually foster change? Socioeconomic board diversity — including non-executive employees as full board members — gives your employees a voice at the table and has been proven to benefit income equality.
Embrace generational differences as well. A separate report from Harvard shows that American boards are getting older every year. Inviting younger members not only models inclusion but also offers an opportunity to tap subject matter experts in various components of your business needs. Younger members often bring a learning agility and resourceful, adventurous spirit. The millennial and Gen Z generations are too big and too powerful to be ignored. Inviting their perspective at the upper echelons of power will inherently make your organization stronger.
If your board is homogenous, increase exposure
If your board is all white, all male, all C-suite executives, all upper middle class, and all 65+ but you know you won’t have openings soon, think about what you can do right now to expose your current board members to people who aren’t like them. Hire trainers, consultants and strategic advisors that are culturally diverse. Look for ways to connect your board members with frontline employees within your organization and with non-white, non-male community groups.
Boards are powerful for two main reasons. They select the people who lead the organization, and they set the agenda for strategy and vision. Essentially, they are decision-making and networking teams. A lack of diversity in the boardroom means uninspired decision-making, limited partnerships and slower innovation. Those boards become a limiting factor for organizational success.
Understanding the current state of board diversity requires us to reflect on our standards for excellence. What does success really look like, and how can we push for leadership diversity that reflects the diversity of our customers and communities? If you have innovative solutions, reach out to me on LinkedIn or leave me a comment below. Let’s move the conversation forward.
About the Author
Donald Thompson is a serial entrepreneur, angel investor, author, podcaster, public speaker and member for numerous corporate and not-for-profit boards, including The Raleigh Chamber, Vidant Medical, and TowneBank Raleigh. He is currently the CEO of Walk West, a digital marketing agency, and co-founder of The Diversity Movement, a technology-enabled diversity, equity and inclusion training firm that supports diversity of thought at every level. Join them for a webinar on how to have civil conversations, Thursday, November 19th at 12:00 pm or learn more about Donald by visiting donaldthompson.com.
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