To make companies more diverse, change has to come from the board

To make companies more diverse, change has to come from the board
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C-suite executives, employees, hiring directors—everyone seems to be clamoring for companies to become more diverse. And, yet, progress has been slow, especially in positions of power. For change to truly be effective, experts say it has to come from one group: a company’s board.

It makes sense that the board can wield this kind of power over a company. It is, after all, at the top of a company’s structure, says Keith Meyer, a consultant at Allegis Partners, which helps companies choose new board members, and the president of the Directors Academy, a nonprofit focused on increasing diversity on corporate boards. “The CEO reports to the board. If the tone at the top isn’t being set by the board, more likely than not it’s not being set further down, and you won’t have the same message or delivery of what the company is about. The board has to be engaged.”

Stewarding that culture is actually an important part of a board’s role. Officially, the board is tasked with directing strategies for the company to compete and thrive in both the short and long terms. They make key decisions like whether they should acquire another company or sell theirs. But they also have to think more holistically about what a company stands for, Meyer says. Board members should be considering how their business fits into large-scale environmental, social, and governance issues, and how to attract and keep qualified, diverse employees, Meyer says.

There’s no single recipe for who should sit on a board. On average, company boards have about 11 members each. At private companies, those members typically are appointed by the CEO; in publicly held companies, board members have to be elected (at least nominally) by shareholders. Ideally, each board member should have a particular kind of expertise that can help steer the company. If it’s a healthcare company, for example, it might be a good idea to have a few doctors on the board, as well as someone with experience in insurance and finance.

But the special sauce for the board of a progressive-leaning company? Someone who is able to speak truth to power. “You have to have people who are willing to raise things that are uncomfortable,” says Maryam Banikarim, the former chief marketing officer at Hyatt International who currently sits on the board for Reporters without Borders USA. “I think strong leaders hire people that aren’t going to just agree with them. You need people who are willing to speak the truth even if it’s uncomfortable.”

Being outspoken is actually pretty rare, Banikarim says—most people know that speaking up can cost them, so they don’t risk it. But because of their position of power, board members don’t have to worry about retribution from higher-ups, as others in a company might. That doesn’t mean they have to be confrontational about the policies they believe would be most effective for making a company more diverse. They should be articulate and diplomatic enough to get the CEO and other powerful decision-makers on board. This, Banikarim argues, is part of their basic job description.

According to a report from Deloitte, in 2018, women held 22.5% of board seats in Fortune 500 companies; people of color held 16.1%. Neither number represents a dramatic shift since 2010. But they have inched up, a sign that boards are at least starting to think differently about diversity.  “Almost every board today has a strong focus on becoming more diverse—on diversity of thought, on bringing all the right voices together around the table. That is a huge change, and it’s happening,” Meyer says.

For companies not making organic changes, governments may step in. Last year, California passed a law requiring that every public company with headquarters in the state have at least one woman on its board by the end of 2019; by the end of 2021, five-member boards must include at least two women, and board of six or more must have at least three women. The penalty for not meeting this requirement is a fine.

Meyer hopes that diverse boards will be the norm within the next decade. “If we’re not talking about it anymore, that means success, that means we’re there,” Meyer says. “I hope we make huge progress to get to that point in the next 10 years.” To do that, he says, we need boards with members who are mostly not white men. And once that happens, we can expect more diversification at companies overall.

This story is part of How We’ll Win in 2019, a year-long exploration of the fight for gender equality. Read more stories here.