CEOs and boards continue to talk about how to make real and lasting changes to culture to address racism and implicit bias in their own organizations. Shareholders are making clear they will not be forgiving toward boards who fail to take action on these issues: in July alone, three big boards—Oracle, Facebook and Qualcomm—were hit with shareholder lawsuits alleging breach of fiduciary duty because their companies failed to make progress on D&I or tolerated racially discriminatory practices.
A board that is not itself diverse, both racially and with respect to gender, will have a hard time defending itself against similar suits. But that’s the hardly the only reason boards are placing a greater focus on adding different perspectives. Donald R. Knauss, lead director at Kellogg and board member at Target and McKesson, says all three of his boards take diversity seriously “and it’s not because it’s the politically correct thing to do—we’re doing it as a business imperative. Because I think anybody with brains can figure out that if I’m dealing with multiple constituencies, I’ve got to have people that represent those constituencies on my board or I’m not going to have a very robust strategy going forward.”
In the following interview excerpt, Knauss, who has served on multiple Nom-Gov committees, and currently leads that committee at Kellogg, explains his process for getting the right skills while correcting for his own implicit bias in the search for top boardroom talent.
“The first thing is, you have to have an objective look at, what is the skillset I need as I’m looking to add a director to a board? Any board has to be helping with three core processes: 1) operations, which is really delivering the present, if you will, that annual plan to deliver the numbers to sustain the enterprise; 2) strategy, which of course the board has a heavy role in, and that’s clearly creating the future and what that better future looks like for the company; and 3) people, or developing the pipeline of talent that’s going to sustain the enterprise to be able to both deliver the present and also create the future going forward.
“So when I look at the gaps on my board, I’m going to start with the lens of what is the capability I need to make sure that this company’s mission and our ability to provide governance over those three core processes is robust? So depending on the industry you’re in, is there a financial gap? Is there an investment banking gap? Is there a digital technology gap? Is there a marketing gap? That helps screen out some of this bias because when you’re looking at skillset, I don’t care if it’s male, female, black, white, it doesn’t really matter.
“So all people have biases but if you start with the relevant skills you need to provide your governance function, that really helps. So [let’s say] I’m looking for a CFO, I’m looking for an active duty CFO or a recently retired CFO because I have a financial gap and so-and-so is retiring off the board.
“Then the next screen is, I want a diverse slate to fill that gap. What is the current composition of my board? If I’ve got 12 people on this board and I have 10 men and two women, I’m going to look for another woman because I’ve got a balance here I don’t like.
“I’m also going to look at ethnicity. Do I have all points of view around the table— White, African American, Asian, Hispanic—do I have points of view from those different communities because I serve all those communities. So I think you look at the skill set first, and then you look at the differences that gender and ethnicity bring in terms of points of view and the balance on the board. And if I don’t like the balance, if I don’t feel like I’ve got a diverse representation of points of view, then I’m going to look to fill that gap as well because I believe that a heterogeneous group is going to come up with better solutions than a homogeneous group.
“When I look at the boards I sit on, we have that kind of really good gender and ethnicity diversity. Even at McKesson, despite the fact that they don’t have this direct to consumer approach that the other companies I’ve served on do, there’s still a really hard commitment to making sure that we have that kind of diversity on the boards in terms of points of view, which comes from ethnicity and gender and life experience. It’s a business imperative.”