Oil paintings of distinguished men are a common backdrop in boardrooms across America. But this scene is increasingly outdated as executives and employees push for a board that more accurately reflects today's leaders and organizations.
"Boards of directors and individual directors need to understand that if there is no diversity in their own boardroom, they are increasingly looking behind the times," said Joseph Daniel McCool, co-author of the book Board Games: Straight Talk for New Directors and Good Governance. "They are increasingly looking old-school, out of step with the expectations of employees, of customers, of shareholders."
As the United States becomes more diverse, it is essential that board makeups represent the customers the company serves, McCool said. Meanwhile, companies with shareholders are increasingly answering to socially conscious investors who want a board that "can represent a wider array of viewpoints," said McCool, principal of The McCool Group, an Amherst, N.H.-based advisory firm that focuses on management succession and the board nominating process.
PwC's 2016 Annual Corporate Directors Survey found that the percentage of directors who view gender and racial diversity as key director attributes has increased over the last two years: Forty-one percent consider gender diversity "very important," up from 37% in 2014. Nearly 35% labeled racial diversity "very important," up from 28% two years ago, according to the survey, which included responses from more than 880 public company directors. Meanwhile, more than eight in 10 believe diversity "at least somewhat enhances board effectiveness and company performance."
Even so, change has been slow. In 2015, women made up 20% of S&P 500 boards, up only 5 percentage points in a decade, and it "may take much longer than the government's estimate of 40 years to reach gender parity on boards," the survey found.
For those looking to bring change, here's how to get started:
- Be open: Let employees know a diverse board is a priority, said Avery Blank, a lawyer and strategist who advises minorities and women on how to achieve business, leadership, and policy goals in their careers. "It's critical for corporate leaders to let people know that diversity is an important part of their culture," she said. They need to be transparent with their desire to have a diverse board, she added.
- Listen and learn: Meanwhile, companies need to show that board service is not just for the older set, Blank said. "There needs to be a mind shift by both individuals and companies. Individuals need to see getting on a board as a career advancement strategy, not a retirement plan," she said.
Blank also suggested listening. Some employees want to serve on boards, but they aren't vocal about it, so keeping eyes and ears open for signs of interest is key. "Everyone can add value. It's just the question of finding the right fit," she said.
- Rethink diversity: When it comes to recruiting, diversity can include gender, age, and background. Blank added that companies shouldn't exclude someone just because he or she has no board experience. Look for women, midcareer professionals, younger workers, and academics who can provide perspectives that improve a board.
- Expand networks: Too often board members suggest their friends: PwC found that 87% of respondents used board member recommendations when looking for a new member. This often results in the same people sitting on multiple boards. "You have a self-fulfilling prophecy here, and 99.99% of our population doesn't even get considered," McCool said. "What they need to understand is who they don't know.
Marilyn O'Hearne, a leadership and executive coach and author of the forthcoming book Bursting Bias Barriers, suggested meeting three new people at networking events, connecting with a trio of new people each week on LinkedIn, and seeking out networking events "and people at those events who have different cultural identities." Try a Hispanic chamber of commerce, for example, or university alumni groups whose members differ from your current board, she said. To boost female participation, find a group like 2020 Women on Boards, a national campaign dedicated to increasing the percentage of women on corporate boards.
- Hire a professional: If networking doesn't yield diverse board members, it may be time to hire help. However, make sure the search firm has access to a diverse candidate pool and that it can recommend candidates beyond those who are already on your radar. "You have to be very careful there," Blank advised. The best firms work to understand your needs and culture but aren't afraid to be frank when diversity is lacking. Make sure they're thinking about the skills you need—someone with relevant legal knowledge, instead of just a lawyer—and looking outside the box for interesting candidates.
McCool said it is imperative that companies spend ample time getting the right board mix—one that includes diversity in age, gender, race, and talent. "It's been said that some of the best and worst things that can happen to a company have their genesis in the boardroom, particularly in terms of crisis," he said. "You've got to have the right people around the table."
Dawn Wotapka is a freelance writer based in Atlanta. To comment on this article, contact Chris Baysden, senior manager of newsletters at the AICPA.