DiversityInc Founder and Chairman Luke Visconti, along with five other expert panelists, offered their perspectives and experience during the House Committee on Financial Services hearing, entitled: “Diversity in the Boardroom: Examining Proposals to Increase the Diversity of America’s Boards.” Or, in most cases, the lack of diversity in America’s boardrooms.
The other panelists were Ms. Chelsea Gurkin, Acting Director, Education, Workforce and Income Security Team, U.S. Government Accountability Office (GAO), Mr. Ron Lumbra, Managing Partner of Heidrick and Struggles, Ms. Linda Akutagawa, Chair, Alliance for Board Diversity, Ambassador Vilma Martinez (Ret.) Argentina and Dr. Stephanie Creary, Assistant Professor of Management, Wharton School of Business, University of Pennsylvania.
- Board diversity is critical for growth and success in a company, and the numbers are there to prove it
- What is most vital is a commitment from leadership to showing greater diversity on the board
- Hiring recruits outside of the CEO, COO or CFO pipeline is essential to bring on diversified talent
Why Diversity Is Important and How to Increase It
According to the Alliance for Board Diversity, over 80 percent of new board directors at Fortune 500 companies in 2017 are white males. While the United States has come a long way in diversifying boardrooms, there is still massive room for improvement.
Congresswoman Maxine Waters (D-Calif.) presided over the “Diversity in the Boardroom: Examining Proposals to Increase the Diversity of America’s Boards” subcommittee meeting. Waters expressed her disappointment in corporate and federal boards that are not living up to their responsibility to reflect America’s diversity.
“Strong diversity in the boardroom is critical to continuing U.S. competitiveness,” Waters said. “Highly inclusive companies outperform their competitors, are more innovative and generate 1.4 times more revenue.”
For Gurkin, “There is no silver bullet, no one size fits all to these challenges.” In her perspective, making corporate boards more diverse is done by increasing the size of the boardroom and making sure that the pool of candidates to choose from is diverse. Pulling leadership from other departments in the company and not just the CEO pipeline is essential, as well as considering people from academia, the military, and just outside the company altogether.
In the end, it’s the commitment to diversity among the board that has shown to be the most successful.
Financial Institutions Part of the Problem and the Solution
DiversityInc Chairman Luke Visconti aptly said that “Diversity is the concern of every American because our destiny is shared by all.”
He also said the bank industry is holding back the U.S. GDP because of a lack of diversity in their leadership.
However, there are five banks on the 2019 DiversityInc Top 50 list: Wells Fargo is at No. 13, TD Bank is at No. 19, KeyBank is at No. 36, HSBC at No. 40 and U.S. Bank is at No. 46.
“Wells Fargo and TD Bank are the only top 10 largest banks in the U.S. that compete for a spot on the top 50,” Visconti said.
His top three best practices for diversity had an executive diversity council, a CEO chairing the committee and regular monthly meetings.
Regulation and Accountability
Several of the panelists mentioned regulation as a potential necessity to increase diversity in federal and corporate boardrooms in the U.S.
Visconti cited the NFL and the Rooney Rule as an example of a lapsed regulation that isn’t working. Adopted in 2003, the Rooney Rule is an NFL policy requiring every team with a head coaching vacancy to interview at least one or more diverse candidates.
(See a video clip of the discussion on the NFL below)
“The Rooney Rule was established in the NFL in 2003. But the NFL is still a plantation. Eighty-eight percent of head coaches, 97 percent of owners are white, and only 30 percent of players are white. Their access to capital is an essential competitive advantage for our country,” Visconti said. “There’s an acceptance of the bad results over and over and over again, which is why I think regulation needs to be put in place.”
DiversityInc’s Visconti used PwC, (DI Top 50 Hall of Fame), as an example of what works for increasing diversity.
“The non-HR person in charge of diversity… he became responsible for the committee that took people who are accountants and made them partners. They would have a board meeting, and peoples’ files would be on the screen. When he’d come to a person, and he said it was most likely an un-white person or a woman, who didn’t have the right experiences to be a partner, he would stop the meeting and call up that person’s boss and ask, ‘Why didn’t Kathleen have the right experiences? This file is in front of the committee, and she’s not ready. You’re the boss. Why didn’t it happen?’ That changes the conversation when there’s accountability from the top,” Visconti said.
Obstacles to Diversity and Their Solutions
Lumbra advises companies on leadership and board succession and recruitment. Barriers to diversity on corporate boards are low turnovers and board members wanting to be around people they can get used to quickly, so they pick people from their networks, he said.
Things that are working: board assessments that bring in new, contemporary, diverse directors. The best boards expand opportunistically in order to capture diverse talent, Lumbra said.
Some of the biggest obstacles cited were diversity in high-tech companies. According to Martinez, getting minorities into magnet schools with a focus on STEM while they’re still children and teenagers is key to increasing tech diversity.
But Akutagawa blamed mostly unconscious bias for lack of diversity in STEM because leadership in the most prominent companies are almost all white.
“The tech industry is the worst in this country in the subject of diversity,” Visconti said.
A vaccine for lack of diversity is also research, according to Akutagawa. Research helps people see that there is not diversity, and it keeps boards from becoming complacent.
“What gets measured, gets done,” Akutagawa said
A current obstacle to complete diversity is that over the last decade, gender diversity has increased the most but diversity in terms of social class, race, ethnicity, or age has been far slower to improve.
According to Creary, what creates diversity from the top down is a board with combined skill sets that utilize every single person and pick each brain for their experience. A diverse board is useless if the people who bring diversity are not fully included in discussions and decisions. Diversity of thought is essential, Creary said.
“It’s about board culture too and encouraging conversations about diversity.”
DiversityInc strives to hold companies accountable for choosing diverse talent from the board to lower level employees.
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Click here to watch the full committee meeting:
Below are the timestamps for testimonies in the complete video (linked above):
Maxine Waters (09:53)
Chelsea Gurkin (20:00)
Luke Visconti (24:28)
Ron Lumbra (30:00)
Linda Akutagawa (35:00)
Vilma Martinez (40:00)
Stephanie Creary (44:43)