In Wednesday’s edition of NACD Directors Daily, the Sacramento Bee reported that Sodexo was named to the Black Enterprise Top 40 Best Companies for Diversity list for the fourth consecutive year. The company was recognized, in part, for the number of ethnic minorities represented on the company’s board of directors.
While there has been a call for increased diversity in the boardroom for years, the majority of companies have not significantly added to the number of minority directors (based on race and nationality) currently on their boards. According to the 2011 NACD Public Company Governance Survey,52.4 percent of companies do not have minority directors. Just over 27 percent of boards have one minority director, and only one in five have two or more.
Similarly, few women serve on America’s public company boards. Nearly one-third of public company directors indicate that their boards do not have any female representation. Half of respondents say their boards have just one female director. Just 11.5 percent responded that their boards have three or more women directors.
However, these percentages appear to be increasing. Survey responses indicate that the number of boards with at least one minority or female director has increased since 2006. Over 38 percent of boards in 2006 had at least one minority director, and in 2011, this number increased to 47.6 percent. Additionally, boards that reported having one female director slowly increased from 64.8 percent in 2006 to 67.4 percent today.
The final 2011 NACD Public Company Governance Survey will be available in late August.
Boards today face an increasing number of demands. In addition to an increasing number of regulatory requirements, they are also meant to be the problem solvers and strategic leaders for companies. With the fast pace and growing complexity of business today, that is no small task. To guide an organization through today’s challenging business environment, the board must be comprised of directors with a wide range of skills and experiences
Diversity of a board is not simply guided by race or gender. There must be diversity on an intellectual level. A board that truly serves as a strategic asset to investors is one that brings together a team whose skill sets are aligned with the goals of the company. For example, a U.S. company interested in expanding overseas operations should have a director on its board that has experience taking a company global.
Even companies that have a targeted demographic, such as Avon “the company for women,” have diverse boards. Although Avon’s tagline is generally a women-centric company, the company’s board is represented by a mix of men and women, as well as directors with varying ethnic backgrounds. Boards today need to have a range of skills and experiences in their portfolio to help companies succeed in an increasingly competitive environment.
1. Analyze the needs of the board, its strengths and weaknesses, and determine what skills are needed for aligning the board with the strategy of the company.
2. Recruit to the board’s needs by casting a wider net to find candidates who have the skills, experience, desire, and time necessary to drive performance at the board level.
3. Evaluate the board regularly to identify areas to improve its own performance and develop a plan to address them.
Boards of directors are working to build better balanced boards through the assessment of skill sets and experience. NACD offers several board composition planning tools to help directors determine the best possible construction for their boards.
Lead directors play a significant role in the boardroom, enhancing board effectiveness by acting as independent figures in communicating the needs between the company’s management and board. Five years ago, only 39 percent of boards had lead directors. That number has almost doubled. Today, 66 percent of boards have a lead director.
NACD broadly defined the duties of the lead director in a 2004 Blue Ribbon Commission Report. Leveraging their years of experience, the NACD Blue Ribbon Commissioners will clarify the role of the lead director in order to enhance the effectiveness of the lead director in the boardroom. The 2011 report will expand the earlier recommendations by exploring how the lead director role can be used to the fullest extent. Specifically, the report will discuss the evolving roles and responsibilities of the lead director; the ideal profile of a lead director; and key relationships and communications of the lead director, including those between management and shareholders. The report will also offer recommendations for future challenges facing the role.
The 2011 Commissioners who contribute their views to the report are directors from leading companies and corporate governance experts. In addition to co-chairs Barbara Hackman Franklin and Irvine Hockaday, the panel includes: