Diversity in the boardroom is this year’s inescapable topic.
California passed a rule requiring publicly-traded boardrooms must have at least one woman on their board by 2019 and two female directors by 2021, if they have five people on the board. This has sparked a nationwide conversation on whether or not forcing quotas in the boardroom is a way to solve the lack of diversity on boards.
Heidrick & Struggles, a publicly-traded executive search firm that helps boards find director candidates, recently pledged that on an annual basis at least half of its cumulative slate of initial board contenders presented to clients will be diverse. Corporate Board Member caught up with Bonnie Gwin, vice chairman and co-managing partner of the global CEO & Board Practice at Heidrick & Struggles, to talk about boardroom diversity.
Below are excerpts from that conversation.
How would you rate the progress of boardroom diversity in the last few years?
I think it depends on how you define diversity, but I would say there’s a lot more opportunity for boards to improve. But the great news is, as you saw in our most recent board monitor report that in 2017 we had an all-time high in terms of the highest proportion of women appointed to boards over the nine years we’ve been tracking that. So I think that’s really excellent progress, but I think there’s an opportunity and a real challenge for boards to make more progress both in gender and ethnic diversity appointments.
What are the biggest roadblocks that you’re seeing towards greater boardroom diversity?
There are a number of things, but probably the one that comes up most frequently when I’m talking to clients and my colleagues is the fact that boards continue to focus on appointing CEOs. It continues to be the most-appointed role. When you look at the functional roles that people have when they join a board in, they tend to be CEOs, that’s the majority. I think the number last year…I think it was about 50% again. And because there are so few women and people of color who are in the CEO role, if a board is focused on bringing on a CEO they’re unlikely to have diverse placements. And I think that’s been one of the biggest issues.
Why are so many boards focused on getting the CEOs in the board positions rather than a diverse range of executives and leaders with experience?
I think CEOs certainly bring a valuable breadth of strategic and operating skills to boards and boards recognize that. And it’s a pretty risk-averse move to make when you add a CEO to the board because she or he is going to understand how boardroom works, they understand the breadth of the business, of running a business and they’re usually pretty well-known individuals.
So there’s a sense of transparency because they’re easy to get to know typically. And I think that, particularly in an environment where you have activists and very active shareholders, you have a lot of people putting a microscope on the work that boards are doing, and appointing a CEO brings them some skill sets that I think gives them some comfort.
On the other hand, I would say boards are starting to realize that there is power in diversity, I mean, that there’s real business value in having a diverse set of perspectives at the board, and you’re not going to get that if you have only CEOs on the board. So I think that’s why we’re seeing the trend we’re seeing, which is last year we saw a slightly lower percentage of new board members who are CEOs and a much bigger percentage were women, and also there were some increases in ethnic diversity as well. And I think that’s a recognition of the fact that there’s power in diversity in the boardroom, business power.
How do you deal with some backlash that might come from current board members and maybe even people on the executive team or people who might say, “We should go with people who are the most qualified regardless of gender, regardless of diversity.” How do you deal with that potential backlash?
I would push back and say that there are many, many diverse executives who are extremely well qualified to be on board. It depends on what a particular board is looking for, but I would argue that in every case you can find diverse executives who are well qualified to meet what the board is looking for. And there’s no compromising there and no compromising necessary.
What about legislation that requires more diversity? We saw that in California, potentially some other places, is that kind of… is that effective in terms of promoting diversity?
Well, I think it’s to be determined. I think in Europe where there has already been legislation, I think it has increased diversity in some countries, but I’m not sure it’s necessary to do because I think there are many, many qualified executives who are diverse, and I don’t think they need legislation to identify and place those on boards.
Next page: Gwin shares her six tips for improving boardroom diversity
