February 2, 2021
February 2, 2021
According to PwC’s 2020 Annual Corporate Directors Survey, four out of five board members say companies should be doing more to promote gender and racial diversity in the workplace—but only 3.2 percent of Fortune 500 companies disclose the complete race and gender breakdown of their workforces, according to Fortune.
Black, Latinx, and women employees are recognized as underrepresented in the upper ranks of corporate management and board leadership. And yet, even companies that already disclose diversity data within their annual or corporate social responsibility reports recognize that there is room for improvement in their diversity and inclusion strategies.
If diversity, equity, and inclusion (DE&I) initiatives weren’t routinely discussed in your boardroom before last summer’s social unrest, they are sure to be now. How can you, as a director, harness this momentum and help move your organization toward greater transparency and real DE&I progress? You can start with the following three steps.
1. Establish a set of DE&I metrics. The fact that most directors in PwC’s survey acknowledge the need for companies to step up their DE&I efforts is a nice start—intentions are good. But as any executive coach will tell you, goals that aren’t measurable are often missed.
Ask management to provide regular updates to the board on a set of standardized data. At a minimum, that data should encompass company-wide metrics such as the race, ethnicity, gender identity, and sexual orientation of the current workforce, including leadership, new hires, those recently promoted, and employees who have left the company.
Although the appropriate metrics will likely vary by company, sample dashboards can help you to begin thinking through the possibilities and questions you can ask of management along the way. Grounding board conversations about DE&I in data can help focus the discussion and establish a baseline for tracking progress as you would for any other business initiative.
2. Monitor DE&I progress. Once you are regularly receiving the requisite data, you are better positioned to assess the quality and feasibility of the organization’s strategic plan for increasing diversity (there is a plan, right?). Directors should confirm that management is implementing solutions to effectively address these issues. They can spot trends, ask tough questions, and keep their eyes on areas for improvement.
For example, when PwC publicly released its own Diversity & Inclusion Transparency Report for the first time in September, it included data on diversity at the partnership level, specifically looking at Black, Latinx, and female leaders. The company wants to know whether the programs it put in place to reach those employees are working—which would be evidenced by an increase in diversity at this stage of leadership. These programs include reaching out to diverse employees earlier in their careers, providing training and development, making introductions to mentors and sponsors, and offering assistance with mapping out career paths that meet their aspirations.
Directors will also need to weigh the right place on the board to monitor DE&I. While the full board should understand the broader DE&I strategy and receive regular progress updates, in-depth oversight may better live at the committee level, perhaps closely linking related efforts to other environmental, social, and governance or workforce oversight issues. The nominating and governance committee, for one, will be interested in the shareholder engagement element of DE&I, while the audit committee will be interested in disclosure, messaging, and metrics.
3. Develop a plan for releasing DE&I data externally. Although it could take time to get there, the endgame should be for your company to publicly disclose diversity statistics, whether or not this is legally required. It’s one thing to be aware of your organization’s lack of diversity among corporate leadership, but seeing the actual numbers can motivate action.
Although your company may not be ready to disclose its DE&I data immediately, there should be a plan to release some data sooner rather than later. As uncomfortable as it may be, transparency creates accountability. Few of us would get anything done if we weren’t accountable to others. And those companies willing to send their data into the world first are more likely to be looked upon favorably by investors and other stakeholders who are sensitized to this issue.
If we learned anything in 2020, it’s that companies are now expected to play a much greater role in societal issues. This journey is one of the most difficult challenges for an organization to take on. But encouraging your company to become more transparent about its DE&I data and its progress on related initiatives will help the business establish and maintain the trust of employees, communities, and shareholders at a time when trust has become an even more valuable corporate commodity.
Maria Moats is a partner with PwC and the leader of PwC’s Governance Insights Center, which strives to strengthen the connection between directors, executive teams, and investors by helping them navigate the evolving governance landscape.
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