More on Board Governance: Diversity in the Boardroom
The Alliance for Board Diversity released its 2010 Diversity Census on May 2, 2011. The report, entitled “Missing Pieces: Women and Minorities on Fortune 500 Boards” (PDF), indicates that little has changed since the Alliance’s first census in 2004. While women represent a majority of the U.S. population and racial and ethnic minorities together are over one third of the U.S. population (and growing faster than the white majority), the new census indicates that “white men continue to dominate corporate boards and have, in fact, increased their presence since 2004.”
Looking at Fortune 100 companies, the Census found that 72.9% of directors in 2010 were white men, an increase from 71.2% in 2004. Overall, men dominated the boardroom with 82% of directors, compared to 83.1% in 2004. The picture is even bleaker among Fortune 500 companies, where 77.6% of the directors were white men in 2010 and a total of 84.4% were men. Only 15 Fortune 500 companies had men, women, African-Americans, Asian-Pacific Islanders, and Hispanics on their boards based on the 2010 information.
With the release of the 2010 Census, SEC Commissioner Luis A. Aguilar issued a statement bemoaning that while there are more qualified diverse board candidates than ever before, corporate boardrooms have in fact become more resistant to gender and racial/ethnic diversity. A week earlier, Commissioner Aguilar addressed the lack of diversity in a keynote speech to the 2011 Hispanic Association of Corporate Responsibility—Corporate Directors Summit. Speaking to the SEC’s 2009 rule regarding diversity disclosure, he pointed to the results of a recent SEC staff review. The two primary areas of weakness identified in the disclosure were (1) a failure to disclose important information, including about a company’s “informal” diversity policy (which still requires disclosure), and (2) where there is disclosure of a policy, incomplete information regarding the evaluation of the policy’s effectiveness.
OUR TAKE: Both common sense and various studies indicate that any group can benefit from diversity of experience and backgrounds among its members, and that diversity can translate into economic benefits to businesses. Both investors and the SEC are increasingly focused on diversity. Corporate boards cannot afford to be complacent on this issue. And the complaint that there are no qualified diversity candidates rings hollow. There are a variety of resources available as well as personal networks and relationships to mine for qualified diversity candidates that will enhance a corporate boardroom and benefit the company.
