Identifying Obstacles to Board Diversity

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:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.