A seat at the table, but barely: Racial diversity in council rooms remains woefully poor
According to an analysis by Brett Miller, head of data solutions for the ESG division of institutional shareholder services, across the Russell 3000 Index, around 12% of directors and 13% of director positions are racially diverse. The latter figure refers to board seats and is higher due to the diversity of directors serving on multiple boards.
Of the 36 Russell 3000 companies of the Cleveland-Elyria MSA, 11.2% of directors and 10.9% of mandates are miscellaneous.
Although representation among the two groups remains dismal on boards of directors, statistics show that gender diversity has been privileged more than racial parity in recent years.
A lack of board diversity is the fault of companies and the way they seek out board candidates, experts say, which boils down to how the status quo tends to go. against modern diversity initiatives.
Smucker’s has worked in recent years to improve racial diversity and equity in both the workforce and the boardroom. Penrose said it was a company value, but one that became a high priority following a listening tour through the company focused on promoting a culture of diversity. and inclusion. As a result, Smucker’s has since joined the Stop Hate for Profit campaign, made Juneteenth a paid holiday, and made unconscious bias training mandatory.
Events like the Black Lives Matter movement and surrounding protests in 2020 have shed new light on why racial fairness among directors matters.
“Certainly with events given more recently there is an increased focus on this,” said Penrose. “But we have become more intentional, like many companies, and I think it will have positive results for individuals and the organization.”
Smucker’s board of directors, made up of 12 directors, includes five women and three minorities (one is a black woman). That’s pretty much the highlight for businesses based in Northeast Ohio. In terms of building a diverse board of directors, Penrose said the company intends to do even more.
Smucker’s has followed this trend by recognizing that a more diverse business is a better business, Penrose said. This is supported by a litany of studies over the years. For the board of directors, an age limit of 72 has been established for directors to support turnover and create opportunities to fill seats with diverse hires.
Investors are also looking for diversified companies, said Jeannette Knudsen, chief legal and compliance officer and secretary of Smucker’s, and are increasingly pressuring large companies to disclose this information. It’s something that was imposed in California following Gavin Newsom’s signing in September of a law requiring state-owned companies based there to have diverse boards of directors by January 2023.
Given the political landscape in the traditionally red state of Buckeye, Nance is skeptical that anything like this will be legislated in Ohio anytime soon. However, forward-thinking companies recognize that what is happening in the Golden State could set an example for others.
Marcia Moreno, President of AmMore Consulting in Cleveland, helps companies build more diverse and inclusive businesses by thinking about the Latinx workforce and advocates for Hispanic representation on boards. Businesses will ignore this at their peril, she said.
According to ISS ESG, Latin Americans made up only 2.2% of the board seats of Russell 3000 companies and less than 4% of the Fortune 500 seats. Yet Hispanics are on track to represent 25% of residents. Americans by 2045, when whites are expected to fall below a 50% majority of the population.
“This is where Latinos are not fully exploited. It is an important voice that is being left out,” Moreno said. “Sooner or later it will have an impact on the results.”
Yet, many companies cannot get by.
Despite a lot of talk in favor of diversity and inclusion, PwC’s 2020 annual survey of corporate directors found that only 34% of male directors “strongly agree” that diversity improved the performance of the board of directors (compared to 40% in 2018), compared to 80% of women. (compared to 73% in 2018).
Of course, the overwhelming majority of male directors are white.
“When you ask the question why does it take so long for boards to diversify,” Nance said, “there are most of the answers.