The final session of the Diversity Symposium at NACD’s 2015 Global Board Leaders’ Summit focused on the Report of the NACD Blue Ribbon Commission on the Diverse Board and how directors can implement recommendations from that report in their own boardrooms. Kapila Kapur Anand, a partner at KPMG LLP and the firm’s national partner-in-charge of Public Policy Business Initiatives, led the discussion with panelists that included Anthony K. Anderson, retired Ernst & Young LLP vice chair, executive board member, and Midwest and Pacific Southwest managing partner; The Hon. Cari M. Dominguez, a director at ManpowerGroup, Triple-S Management, Calvert SAGE Fund, and NACD; and Karen B. Greenbaum, president and CEO of the Association of Executive Search Consultants.
As the Blue Ribbon Commission that produced this groundbreaking 2012 report observed:
[A] company’s ability to remain competitive will rely on its understanding of global markets, changing demographics, and customer expectations. Diversity is a business imperative, not just a social issue. The new business landscape will require boards to cast a wider net to find the very best talent available. As a natural corollary, the board’s mix of gender, ethnicity, and experiences will likely increase.
Dominguez noted that structural, social, and habitual barriers may prevent boards from becoming more diverse, and she offered this key advice: Don’t rely solely on the company’s CEO to lead this conversation. It’s the responsibility of every director to move the discussion forward.
So why aren’t boards as diverse as they could be? Greenbaum addressed this question by referring to data she collected via a survey of both boards and search firms. Her findings surfaced five issues:
Candidate pool. Boards contended that it was difficult to find diverse candidates. Horn countered this claim by asserting that a failure to find qualified candidates is more a function of boards not searching correctly. Boards should demand that search firms provide a diverse list of candidates. Conversely, search firms take their cue from boards and expect them to be vocal about the importance of having a diverse candidate pool.
Term limits. A lack of term limits results in a situation in which boards cannot be routinely refreshed with new directors. If term limits are restricting opportunities to bring on new talent, consider expanding the board.
Experience: Boards resist adding members who are not current CEOs or CFOs. Boards need to be open to first-timers and should develop strong mentoring programs to bring newly minted directors into the fold.
Succession planning: Build a pipeline of diverse talent in your own company so that these leaders can serve not only in your boardroom but also in those of other organizations.
Status quo. Boards can become complacent about how they operate, especially when they feel no pressure from shareholders or other stakeholders to change.
“All of us must be conscious that this is a leadership issue,” Anderson said. “If the leadership of a company doesn’t believe in diversity initiatives, the ability to make much happen is grossly inhibited.” Companies with a diversity strategy that touches on leadership, employment, and procurement are reinforcing the importance of diversity as part of company culture, Anderson added..
Creating change takes time, effort, and formal processes. Putting diversity on the agenda may require a shift in thinking and habits, but, as all of the panelists agreed, diversity is a business imperative that will only grow in importance over the coming years.
How will boards find the next generation of talent—directors who will be able to maintain their companies’ competitive edge in a global marketplace? This was the question raised in the third session of the Diversity Symposium at this year’s NACD Global Board Leaders’ Summit, and it was addressed by a panel composed of Lt. Gen. (Ret.) Michael Rochelle, founder, president, and CEO of MDR Strategies LLC; Pablo Schneider, CEO of The Wider Net, a firm dedicated to advancing diversity in top leadership roles; and Caroline Tsay, vice president and general manager at Hewlett-Packard Co. and director of Rosetta Stone Inc. and Travelzoo. The panel was moderated by Andrea Hoffman, founder and CEO of Culture Shift Labs, and the discussion broke down the talent search process into three parts:
identifying opportunities for increasing diversity,
analyzing the impact of force multipliers in the boardroom, and
locating these wellsprings of new talent.
Schneider observed that the most promising opportunities for increasing boardroom diversity arise where the board’s biggest knowledge and talent gaps exist. Because demographics and technological innovations are transforming companies everywhere, boards must assess not only a candidate’s skill sets and experience but also whether he or she has the mindset to oversee those transformations. Rochelle added that boards must look at disorder and disruption in order to ensure that director talents correspond to those forces. Tsay advised boards to analyze the skills of prospective directors in terms of their alignment with the company’s overall strategy.
Discussion then moved to the force-multiplier effect—i.e., how having subject-matter experts dramatically increases the board’s effectiveness by providing diversity of thought and cultural perspectives on the profiles of these candidates. Rochelle again brought up the issues of disorder and disruption, asserting that it will be impossible for boards to manage these forces if they continue to rely on traditional approaches. He also noted that an outsider’s view is critical, both because it prompts the board and the executive team to be more diligent in how they analyze day-to-day business and because it provides new insights into potential problem areas.
Tsay echoed this point, offering the example of a Rosetta Stone director who is also the CEO of a media company and who established an advisory consumer focus committee on the board in order to acquire a more granular understanding of the company’s customers. Force-multiplier talents can help boards to rethink the tools they use to reach consumers and how the board can gain an end-to-end view of the industry. “There are opportunities to get candidates with expertise, but how do you best leverage them?” Tsay asked.
Finally, the panelists discussed two key questions: who are the people best qualified to raise the company’s profile, and where can one locate these wellsprings of talent? On this score all agreed that networking is critical. By attending corporate, industry, and/or director education events, current board members will be able to meet and foster professional relationships with potential candidates.
The sidelines of a football field may seem an unlikely place to look for governance best practices, but the policy implemented to diversify the coaching staffs and senior management of National Football League (NFL) teams—known as the Rooney Rule—has applications far beyond the world of sports. In the second session of the Diversity Symposium that opened this year’s NACD Global Board Leaders’ Summit, Jeremi Duru, sports-law expert and author of Advancing the Ball: Race, Reformation, and the Quest for Equal Coaching Opportunity in the NFL (2011), joined Robert E. Gulliver, executive vice president and chief human resources officer of the NFL, and Cyrus Mehri, co-lead class counsel for some of the most significant race and gender cases in U.S. history, to discuss the Rooney Rule, its impact on the NFL, and the lessons it has to offer companies in all sectors.
Although the NFL formed in the early twentieth century, it wasn’t until 1989 that the league hired its first African-American coach, Art Shell. Over the course of the next decade, a few other African Americans held coaching and managerial roles in the NFL, but diversity remained an issue for the league. Then, in 2002, two African-American NFL coaches with winning records were fired: Tony Dungy, whose team had reached the NFC championship playoffs in each of the three previous years, and Dennis Green, whose team was experiencing its first losing streak in 10 years.
In response, Mehri and attorney Johnny Cochran released a study demonstrating that African-American coaches were statistically more successful because by the time they were hired, these men had already spent years honing their craft in apprenticeship positions. However, African-Americans were less likely to be appointed to higher-level coaching positions and more likely to be fired when their team hit a losing streak. To address this situation, the NFL in 2003 established the Rooney Rule—named for Dan Rooney, who was then coach of the Pittsburgh Steelers, a team that historically had created opportunities for minority players and coaches. The rule requires management to interview minority candidates and give them equal consideration when hiring for particular job categories.
Being attuned to diversity issues is key to attracting the best leadership, according to Robert Gulliver. As a former wealth, brokerage, and retirement HR officer at Wells Fargo & Co., Gulliver might have seemed an odd choice for a role at the NFL, but the skills he developed in the financial sector transferred easily to his work for the NFL. Gulliver emphasized that, in addition to diversity of background, diversity of perspective allows the company to connect more strongly with its consumer base.
One area in which the NFL acknowledges the need for more work is that of gender. While approximately 45 percent of football fans are women, only 30 percent of NFL employees are female. By bridging this gender gap, the league can ensure that thought leadership within the company will better reflect its customers.
What is the lasting legacy of the Rooney Rule? In the decade since the rule was adopted, the NFL has developed a culture in which diversity has become a critical element of creating a sustainable business. NFL clubs that initially resisted the rule now recognize that they would fall behind in the market if they didn’t draw from the broadest possible pool of candidates. The message is clear: make your processes inclusive, and make sure that talent rises up. In short, the Rooney Rule has proved that the more inclusive an organization is, the more it and its stakeholders benefit.