Why Do Boards Have So Few Black Directors? by J

RACE Why Do Boards Have So Few Black Directors? by J. Yo-Jud Cheng , Boris Groysberg and Paul M. Healy August 13, 2020 Matthias Kulka/Getty Images Workplace diversity can bring out the best in teams by promoting creativity, encouraging greater consideration of alternatives, and providing access to a wider range of information and perspectives. The numerous benefits also extend to employee recruitment and retention. Despite the growing body of evidence of these advantages and the proliferation of company-sponsored diversity initiatives, the advancement of Black professionals up the corporate ladder has been painfully slow and may even be reversing. / The underrepresentation of Black professionals is especially bleak in the highest echelon of corporate America: boards of directors. Although newly-appointed directors are increasingly diverse, 37% of S&P 500 firms did not have any Black board members in 2019 and Black directors comprised just 4.1% of Russell 3000 board members that same year. In light of these persistent racial inequities, Reddit’s co-founder and executive chairman of the board, Alexis Ohanian, recently stepped down, stating: “I’ve resigned as a member of the Reddit board, [and] I have urged them to fill my seat with a Black candidate.” Reddit has since appointed its first Black board member: Y Combinator CEO Michael Seibel. The deaths of George Floyd, Breonna Taylor, Ahmaud Arbery, Rayshard Brooks, and so many other Black Americans has brought the long history of systemic racism in the United States into sharp focus over the past several months. Pressure is mounting on corporate leaders to consider how their companies can address and rectify ongoing racial injustices. So what are the factors that perpetuate the continuing underrepresentation of Black professionals on boards? And what can be done to change the systems that reinforce these disparities? To answer those questions, we draw upon a About the Research survey we previously conducted of over This survey was conducted through a 1,000 U.S. board directors between 2015- partnership between Boris Groysberg 2016. We note that only 24 of our survey from Harvard Business School; Yo-Jud respondents identified as Black/African Cheng from the University of Virginia; American, reflecting our own shortcomings WomenCorporateDirectors Foundation, in engaging a diverse set of survey led by Susan Stautberg; Spencer Stuart, respondents as well as the state of board led by Julie Hembrock Daum; and diversity in the U.S. today. Our small sample independent researcher Deborah Bell. Survey responses were collected size necessitates that we be careful in between October 2015 and June 2016. interpreting our results. Nevertheless, we Data and figures in this article are based explore the experiences of these 24 Black on survey responses from 1,028 directors board members as a starting point in of companies headquartered in the uncovering and understanding the United States (24 Black/African institutional and social barriers that impede American, not of Hispanic descent; 29 / Asian/Pacific Islander; 24 Hispanic; 914 our progress toward increasing the white, not of Hispanic descent; 37 representation of Black directors on boards declined to report their (see the sidebar “About the Research” for an ethnicity).Director-level survey questions overview of our methodology). are analyzed based on the respondents’ self-reported race/ethnicity (e.g., Black/African American). Board-level The Barriers to and Within the Boardroom survey questions are analyzed based on the number of racial/ethnic minorities Director recruitment. One factor that (more granular data is not available). reinforces the racial status quo on boards is the way in which new directors are typically recruited. These systems are especially ingrained on boards that do not have any directors who are racial/ethnic minorities. When filling open board seats, these boards consider almost no candidates who are racial/ethnic minorities (0.2 candidates per open vacancy, on average), and fewer total candidates (2.9, on average). In contrast, boards with two or more directors who are racial/ethnic minorities consider an average of 1.0 racial/ethnic minority candidate and 3.9 candidates for each open board seat. / / One policy that companies have adopted to shift hiring practices is the Rooney rule, named after former Steelers owner Dan Rooney, who fought for a National Football League policy to require teams to interview racial/ethnic minority candidates for coaching jobs. For example, following investor pressure, Amazon committed to including women and minorities in all candidate slates for director openings in 2018. The company has since appointed two women of color to its board. However, studies indicate that these rules often do not go far enough. Finalist pools need to have more than one candidate from an underrepresented group to meaningfully influence hiring outcomes. Gaining an introduction to the board. The small number of candidates considered for open board seats can make it a major challenge for aspiring directors to obtain their first board seat. Our survey highlighted some of the differences in how directors gain an initial introduction to the board. Over half of Black directors were known to a fellow board member prior to being appointed (as compared to 35% of white directors), and Black directors were somewhat more likely than white directors to have been recruited by an executive search firm, suggesting that these firms can assist boards in expanding the scope of new director searches. On the other hand, white directors were more likely to be a current or former executive of the company, suggesting that the internal pipeline to the board is dominated by white executives. (Interestingly, a similar proportion, approximately one third, of Black and white directors in our survey was already known to the CEO when they were initially introduced to the board.) / / These findings illustrate the heavy reliance on social networks in recruiting new directors, a point underscored by Carnival Corporation CEO and Bank of America director Arnold Donald in an interview with Black Enterprise: “In boards of directors, people tend to go to people that they’re familiar with [and] have grown to know and trust. Often, people don’t / have very diverse circles of people that have that level of trust and confidence.” Because corporate America is predominantly led by white men, this type of network-based recruiting can perpetuate long-standing racial inequities. Director onboarding. For boards to benefit from the diversity of their members’ expertise and experiences and to open the floor for meaningful conversations and debate, boards need to redesign their processes to involve social onboarding and relationship building, which allow directors to get to know one another. In our research, 44% of directors on boards with no racial/ethnic minorities rated their new director training processes as effective, compared to 66% of directors on boards with two or more racial/ethnic minorities; 65% and 74% of directors, respectively, rated their new member integration processes as effective. / / Board leadership roles. Among survey respondents, we found that on average, Black directors joined their first board earlier than white directors (at 39.2 and 42.4 years old, respectively), their educational attainment was higher (79% and 71% held advanced degrees), and that both Black and white directors were concurrent members of 1.4 public boards and dedicated approximately the same number of hours to board service per year (142.8 and 145.1 hours per board). Despite their qualifications and their investment of similar amounts of time to their boards, we found that Black directors in our survey were less likely to hold board leadership roles. Twenty-five percent of Black survey respondents served as a board chairman or lead director, compared to 37% of white survey respondents. Black directors in our sample were also less likely to be board committee chairs than white directors. White directors are therefore more likely to control leadership roles that manage the board pipeline, such as the chair of the nomination/governance committee. / / Board dynamics. Black professionals frequently find that their contributions are ignored and undermined — an issue that can be particularly acute for Black women. We found that this type of racial discrimination can permeate even the highest levels of the organizational hierarchy. Although most directors rated their boards’ dynamics highly with respect to having their voice heard, feeling in sync with other board members, and performing as a team, ratings were notably lower in one particular scenario: when a Black director was the only racial/ethnic minority on the board. Promoting diversity cannot stop when a single black director is appointed to the board; continuous and conscious effort is needed to ensure people of color represent a meaningful segment of the board and to sustain an environment in which different perspectives are actively elicited. / / The Beneﬁts of Board Diversity Our research also affirmed that boards with members who represent racial or ethnic minorities function better in several ways: Diversity of perspectives. Due to the incredible breadth of issues and stakeholders that boards of directors contend with, diversity in priorities and viewpoints is critical. Our survey illustrated some of the ways in which greater director diversity can introduce a broader range of perspectives into the boardroom.

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