Diversity in the Boardroom and C-Suite
America’s largest companies have done poorly with respect to bringing black women and men into meaningful leadership roles and companies need to commit to diversity in the boardroom through purposeful inclusion of women and people of color as members of the board of directors and on advisory boards created to focus on the company’s environmental and social responsibilities and commitments. In addition, all of the directors, regardless of their race, need to hold themselves and management accountable for specific objectives around recruitment, retention and promotion of people of color, and commit to tying compensation for the CEO and other members of the executive team to diversity and inclusion metrics.
The following is an excerpt from the chapter on Racial Equality and Non-Discrimination just released on the website of the Sustainable Entrepreneurship Project.
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The New York Times cataloged the dismal performance of America’s largest companies in bringing black women and men into meaningful leadership roles: no black people on the senior leadership teams of Bank of America, JPMorgan (where managers in Phoenix branches were recorded making racist remarks) or Wells Fargo (which was the subject of a federal lawsuit for discriminating against minority home buyers); no blacks among the senior leadership teams of tech giants Facebook, Google, Microsoft and Amazon; and just four black CEOs altogether among the country’s 500 largest companies. While there has been an increase in the representation of black people in boardrooms in recent years, they have not been very successful in achieving change in their companies, not surprising since the real power remains with the executive team and board management committees that have historically been composed entirely of white males. In fact, while blacks made up over 13% of the American population as of 2020, at that time only four Fortune 500 CEOs were black (and none were female) and less than 3% of senior corporate jobs and less than 8% of all white-collar jobs were held by African-Americans.[1]
In order to increase the chances that black women and men will be offered leadership positions in the C-suite there needs to be more people of color in the boardroom. Companies need to commit to diversity in the boardroom through purposeful inclusion of women and people of color as members of the board of directors. In addition, people of color need to be represented on advisory boards created to focus on the company’s environmental and social responsibilities and commitments. Finally, all of the directors, regardless of their race, need to hold themselves and management accountable for specific objectives around recruitment, retention and promotion of people of color.
One of the biggest contributions that directors can make to progress on diversity and inclusion by their companies is their oversight of the actions and priorities of the members of the executive team, particularly the CEO that leads the team and typically also serves as a director. As environmental and social responsibility has grown in importance in the eyes of various corporate stakeholders and observers the role of the CEO has been evolving substantially to include attention to broader societal, political and cultural issues and problems. According to the author of the Bartleby column on work and management in The Economist: “The modern senior executive must be a statesman (or woman), dealing not just with shareholders but wider society. They must be attuned to the views of their employees and customers, in case the company finds itself in the middle of a social or political conflict.”[2] Bartleby noted that while monetary rewards of managers have been linked to financial targets, rather than these broader criteria, in the past, “the task for the next few years is to find ways to measure the executive’s success in dealing with staff and other stakeholders, when clear yardsticks are hard to find.”[3]
As part of its oversight of executive compensation the board needs to commit to tying performance-based remuneration (i.e., bonuses) for the CEO and other members of the executive team to diversity and inclusion metrics and ensure that contributing to economic and racial justice is part of the CEO’s formal duties and responsibilities. Some companies, such as Microsoft, Intel and Johnson & Johnson, have taken this step; however, they have been outliers and many more companies need to take similar steps. Moreover, while working toward creating a workforce that reflects the world in which the company operates should be a priority of the CEO, diversity and inclusion should be embedded throughout the organization and bonus calculations for employees should also include credit for supporting the company’s efforts relating to hiring and retention goals.
Perhaps the biggest challenge and opportunity for the directors and members of the executive team is making the bold strategic decisions that are required to shift the purpose of the business toward being what the Society for Human Resource Management (“SHRM”) has described as a “force for good in matters of social justice”.[4] There has been much debate regarding the role of business and it has been suggested that “the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems”.[5] Obviously the “purpose of business” is a complex and contentious concept, one that has been and will continue to be debated; however, companies wishing to be taken seriously with regard to their promises of support for racial equity and justice need to be prepared to consider and implement sweeping changes to their business models—SHRM suggested changing revenue streams and/or adding new business lines—and mode of operations, steps that can only be taken at the highest levels of the organization. SDG Compass is another organization that has suggested that companies consider changes to their business models as a way make a positive impact on addressing inequality and empowering marginalized groups in the workplace, marketplace and community and offered the following examples of steps that companies could take: developing products and services tailored for poor customers (e.g. mobile based money transfer services for unbanked consumers); improving access to basic goods and services for people living in poverty (e.g. through core business, policy dialogue, social investment); recruiting, training and employing local community members, including those living in poverty, and integrate them into the company’s value chain as producers, suppliers, distributors, vendors; investing in business-driven poverty eradication activities (e.g. develop living wage policy) and partnering with civil society networks to provide education and entrepreneurial skills training.[6]
[1] The great awakening?, The Economist (June 13, 2020), 49.
[2] Tale of the century, The Economist (June 13, 2020), 52.
[3] Id. at 52.
[4] A. Alonso, “An Employer’s Guide to Demonstrating Equity and Inclusion: Six Ways to Put Words into Action”, Society for Human Resource Management (June 15, 2020),
[5] Principles for Purposeful Business (The British Academy, 2019).
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