The S&P 500 had a banner year recruiting new board members from underrepresented ethnic and racial groups in 2021. According to Spencer Stuart’s recently released 2021 S&P 500 Board Diversity Snapshot, 47 percent of the incoming class of 456 new independent directors on S&P 500 boards are Black/African American, Asian, Hispanic/Latino/a, American Indian/Alaska native or multiracial, yet the overall percentage of racial and ethnic groups on S&P 500 boards remains relatively low. This suggests that it may take several more years of recruitment efforts similar to what took place this year in order to begin to adequately address board diversity at the nation’s largest corporations. So what did corporations do to recruit board members from ethnic and racial groups in 2021, and more importantly, is it sustainable?
According to Spencer Stuart’s recently released 2021 S&P 500 Board Diversity Snapshot, the nation’s largest corporations made notable progress increasing the ethnic and racial representation on their boards since last year:
• One-third (33%) of all new independent directors were Black/African American – the most since Spencer Stuart began tracking that data in 2008.
• Hispanic/Latino/a directors were 7 percent of all new independent directors (up from 3 percent last year) – the highest percentage since 2008.
• Asians accounted for 7 percent of new independent directors, a slight decline from 8 percent last year.
However, even with the progress that’s been made, Blacks make up only 11 percent of all S&P 500 directors, Hispanic/Latino/a make up 5 percent, Asians account for 5 percent and American Indian/Native Alaskan make up less than one percent. To improve these percentages, the Spencer Stuart report is clear: “Ultimately, boards will not make meaningful progress increasing diversity—gender, ethnic, racial, LGBTQ+ and age—or addressing other recruiting priorities such as adding digital and technology experience, without being intentional and embracing a refreshment process that ensures regular turnover, prioritizes the perspectives needed in the boardroom and builds a robust talent pipeline.”
The report makes at least four excellent recommendations of approaches boards are taking to improve their ability to diversify their members. However, those recommendations would take on greater significance if all companies would consider, “How intentional is the organization about making lasting beneficial change?”
Boards may want to ask the following questions to determine how intentional they are about changing their board composition:
• How can the board and management be more intentional about seeing diverse leadership as a strength rather than an unwelcomed requirement?
When company leadership recognizes the value of something, it generally looks to increase it within the organization. Has the board had an honest discussion about the value diversity could bring to the company? Once the specific benefits diversity could mean for the business and organization are revealed, intentionally seeking out diverse individuals who can deliver those benefits should become much easier.
• How can the board be more intentional about board refreshment strategies that can give the company an advantage?
In addition to interviewing at least one candidate from historically underrepresented groups for any board vacancy like the Spencer Stuart report recommends, boards might consider having regular discussions about how board composition could contribute to future growth. The types of skills and experience that the board needed 10 years ago should not be the same as it needs today. As technological advancements accelerate changes in many business markets, anticipating the type of board composition that will be needed to navigate those changes five years from now becomes very important. Being intentional about having diverse perspectives on the board could provide a competitive advantage.
• How can the board and management be more intentional about interacting with and valuing underrepresented groups?
Let’s be honest—diversifying a board requires a real commitment to getting past any discomfort directors might have with interacting with groups of people they may know little or nothing about. Leadership must take the first step and intentionally reach out to members of underrepresented groups to find ways of strengthening the trust that’s needed in order to bring anyone onto a board. Board members might want to consider having discussions about ways they could become more involved with different underrepresented groups with the intention of recruiting diverse board candidates. It’s been said that board recruitment relies on strong relationships. Being intentional about improving relationships with underrepresented groups could go a long way toward making diversifying boards more sustainable.