It’s Time To Take Action On Board Diversity

More than 63% of PwC's new board members are diverse—a very different composition from years past. Here's how they did it.

After an unprecedented 16 months, so much has changed. Although there have been challenges and uncertainty, some of the change has been positive. People seem to be re-energized around equality and inclusivity. As diversity and inclusion (D&I) initiatives kick into hyperdrive and companies make changes to become more inclusive overall, board diversity cannot be overlooked—it needs to take center stage. Now is the perfect opportunity to create a roadmap for meaningful change at the highest level: in the corporate boardroom.

Board diversity is not a new topic of conversation. At PwC, we have been talking about the need for increased boardroom diversity for years, why it’s important and how to get there. Despite mounting pressure, the change of pace in American corporate boardrooms is still slow. Many boards are taking steps to diversify, yet female directors fill just 19% of Russell 3000 board seats,[1] and the representation of Black and Latinx directors stands at just 5% and 3% respectively.[2]

Simply put, too many of today’s corporate boardrooms look a lot like they did a decade ago—and change is essential.

PwC has taken this need to diversify boardrooms to heart. As of July 1, 2021, our new PwC board of directors is the most diverse it has ever been. More than 63% of our new board of partners and principals are female directors (36.4%) and/or ethnically/racially diverse (36.4%). This makes our full board composition very different from prior years. While we’re still not where we want to be, we’re taking necessary steps to get there—and we’re hoping that our progress can be a helpful guide for other organizations to do the same. Here’s where to start:

1. Put pen to paper to increase your board’s diversity and start now

 It’s unrealistic for boards to radically overhaul their composition overnight. But if boards take action now and over the next few years, they can make significant strides. Start by setting clear goals for your board diversity. Leverage robust individual director assessments and succession planning so you can evaluate whether or not each sitting director’s skills still align with company strategy and build a board for the future that has the right skills and diverse perspectives. Most importantly, take action to make necessary changes to composition as needed.

There’s no excuse for not having a robust assessment process in place. Assessments allow for the opportunity to evaluate how directors fit into the future strategy of the company. They can highlight changes the company can make to improve the board. It’s the first step in making a board stronger, more agile and better able to adjust to meet the changing needs of the company and its stakeholders.

Individual assessments can be a big piece of helping to identify the right changes to make on a board, including those that will result in a more diverse boardroom. According to our Annual Corporate Directors Survey, fewer than half of directors tell us that their corporate boards conduct individual director assessments—but keep in mind that any assessment process is only effective if it actually leads to real improvements. Create an effectual assessment process that can help your board make room for high performing directors who can also add the diversity that your board needs.

Having a clear succession plan is also critical. It could be that the board should temporarily expand to bring on new members, sizing back down in the future. Or perhaps sitting directors will be leaving their roles in the next few years, making room for new members. Think about what the next few years your board could look like. Compare the current board composition with where it should be in terms of diversity—and create a plan to get there. Share that plan with the entire board. Transparency with the full board around succession planning will help keep board diversity locked in as a priority.

2. Prioritize a diverse board candidate pipeline

 Keep in mind, there’s more to confronting this issue than just diversifying your own board. Building up the candidate pipeline should be a priority for leaders—management and directors alike.

Start with sponsoring diverse talent. As a director, make it your personal goal to identify a new future board member from an underrepresented group and help them find a board seat. It might be someone from within your company or your own network. If you can’t find someone within your existing network—expand your search.

Directors can also hold their executive teams accountable for their own development of emerging talent. This too will help create more diverse leadership teams in the future. Give these leaders the time and opportunity to develop and demonstrate their skills as a director. You should be a catalyst for their development opportunities.

At PwC, we’re making our own commitments to have a positive impact on business society and to help drive sustainable change. Tomorrow Takes Trust is a three-year, $300 million commitment to embed trust-based principles into the core of today’s and tomorrow’s businesses. Anchoring this commitment is the PwC Trust Leadership Institute which will equip more than 10,000 business leaders with the skills to build trust around tomorrow’s challenges and realities. It’s designed for the current and next generation of C-suite executives and Board members who will lead and advise society’s most trusted organizations. Diversity and inclusion is fundamental to the culture of the Trust Leadership Institute. To foster an environment of inclusion, the Trust Leadership Institute aspires to dedicate at least 50 percent of seats to women and/or racially/ethnically diverse executives within each cohort.

3. Foster Inclusivity

Greater diversity isn’t just a moral imperative, it’s a business imperative, too: inclusive teams allow for different perspectives, creative thinking, open collaboration and drive equitable outcomes. A more diverse and inclusive board leads to better decision making and stronger overall performance.

Diversity should not be a tick-the-box activity. It’s about creating sustainable value for years to come. Creating an environment of inclusivity is crucial to creating that value. In order to augment the benefits of a more diverse boardroom, underrepresented voices need to be heard.

Boards need an open dialogue around diversity and inclusion, and they need board leadership that won’t shy away from the discussion. That means opening the conversation up and changing the dynamics in boardrooms. Invest in board education to raise awareness of unconscious bias and other boardroom dynamics that can have a long-term negative impact on the board’s diversity and inclusion investment and overall performance. Many of these tools are available through CEO Action for Diversity & Inclusion. Recognize that the effort might be uncomfortable—but that it’s a necessary part of the journey that is ultimately in service of future-proofing your board as well as your organization. 

Make no mistake: the time for board diversity is now. We are in a unique moment in time to enact lasting change. Every company should be on a diversity journey. Depending on what needs to be addressed, change at scale can take years. But with proper governance, you can create meaningful changes at the highest level of your organization in the short term that will benefit your company for years to come.

 

[1] The Conference Board, Corporate Board Practices in the Russell 3000 and S&P 500, 2020 Edition; https://conferenceboard.esgauge.org/boardpractices

[2] Compliance Week, “Study: Racial diversity still lacking among Russell 3000 board members,”

https://www.complianceweek.com/boards-and-shareholders/study-racial-diversity-still-lacking-among-russell-3000-board-members/30160.article

KPMG and the Latino Corporate Directors Association, Latino representation on Fortune 1000 boards, 2020 Edition;  https://www.latinocorporatedirectors.org/docs/latino-representation-fortune-1000-boards.pdf