Board Diversity Improved After BLM Protests—But Is The Director Selection Process Fair?

Black representation on corporate boards has not resulted in any of the fears previously put forward by opponents.

Recent research examining the impact of the Black Lives Matter protests on racial diversity of corporate boards makes the case that an increase in racial diversity on boards was achieved at unprecedented speed without resulting in negative consequences for the corporations that added black board members. However, how directors are selected to sit on boards may not have improved as much as people think.

The research, appearing in the latest edition of “Corporate Governance: An International Review,” was recently discussed in the Harvard Business Review. Among the key findings:

• The Black Lives Matter protests and public pressure from shareholders, consumers, employees and regulators advocating for racially diverse boardrooms led to a significant increase in the proportion of board seats held by Black directors (rising from 8.2% of board seats in 2020 to 9.6% in 2021);

• Of the 496 companies surveyed 10.7% (53) appointed at least one black director after the protests. Most companies added new board seats when adding a black director rather than replacing an existing director;

• Newly appointed Black directors had higher levels of qualifications on average than other new directors;

• The research showed a positive association between the representation of Black directors and stock returns during the Black Lives Matter protests. The rapid rise in Black representation on corporate boards has not been followed by immediate negative stock returns.

This new research shows that the increase in Black representation on corporate boards has not resulted in any of the fears previously put forward by opponents of boardroom diversity. The claim that there weren’t enough qualified Black board members in corporate America has been debunked by the fact that the skills level of new black directors who have been appointed to boards often surpasses the qualifications of new white directors. Fears that stock prices of companies that added Black board members would decline has been debunked—in many cases stock performance at these companies has improved (that often happens when you add qualified board members of any race).

Greater Fairness In Director Selection?

Ultimately, advocating for diversifying corporate boards should be seen as a governance push for greater fairness in director selection. Hopefully, the data from this research will contribute to encouraging more companies to improve fairness in their board candidate selection processes so that everyone can benefit. If the selection process is truly fair, there would be less need for diversity mandates and disclosure rules.

For example, unconscious bias against Black board members has probably resulted in the fact that (according to this new research) Black directors who have been accepted onto corporate boards are more qualified, on average, than their white counterparts. Perhaps boards could review their director selection process to make sure anyone being considered goes through as unbiased a process as possible. That would be in the best interest of corporate governance and in the best interest of the company. Subjecting some candidates to greater scrutiny than others, based on race and gender, wouldn’t be in the best interest of anyone.  

Directors should simply ask themselves if they can do better when considering the makeup of their board. If companies can believe that it is fair and in the best interest of the company to have a board made up of all white men, would an all-female board, an all-Hispanic board or an all-Black board be acceptable as well? We know that there are enough qualified women, Hispanics and Blacks to make up an entire board. The question is, “Would that be in the best interest of the company, shareholders and stakeholders—if they were all qualified?” Would your current selection process allow for that?

Questions for boards to ponder.