As corporations look inward to address racial imbalances among their respective management and employee ranks—spurred in part by the magnitude of recent social justice efforts—the focus shifts to C-Suite executives and boards of directors. Boards should demonstrate racial equity leadership and impact corporate governance excellence in a variety of ways.
Corporations may be called on as allies in the fight against systemic racism.
Companies have taken a very active role on a community level in response to the Covid-19 crisis, for example, partnering with government agencies to deliver critical goods and services. We have seen this in healthcare and manufacturing, as many companies shift their R&D efforts to developing vaccines and testing protocols and manufacturing desperately needed protective gear. We are seeing a new era of cooperative capitalism, and society may naturally be looking to public and private companies to take a similar leadership role in solving racial equity imbalances.
As perspectives on racism shift, a sideline stance is no longer acceptable. A tone is set at the top of every organization, so boards of directors will be expected to be proactive on this issue—not just in terms of oversight of workforce and talent pipelines, but to set an example of diversity themselves.With that in mind, boards should take a proactive stance and tackle the difficult conversations about race with intent to drive change.
“Board readiness” is being redefined.
Traditionally, to be considered “board ready” was to be a 65-year-old white male executive with enterprise leadership experience. The Covid-19 crisis has starkly highlighted the need for boards to help companies see around corners and pivot abruptly in the face of extreme disruption. The ability to recognize and adapt to looming disruptions—or even better, to find the opportunities inherent within them—is highly dependent on cognitive diversity.
Cognitive diversity is born of an amalgam of experiences, skillsets, backgrounds, ages and perspectives. It is difficult for a board to help a company anticipate and react to shifts in consumer behaviors, for instance, when directors have no context for the culture, lifestyles or values of their customers, or even their employees. Without cognitive diversity to help leadership teams to see around corners, many companies could face significant challenges that threaten their ability to compete amidst the accelerating pace of change.
Companies will be held accountable to achieve meaningful diversity.
Diversity has become a strategic imperative. It may no longer suffice when companies claim to make a “best effort” regarding their diversity efforts but have demonstrated little progress. Like any other challenging business issue, diversity requires a proactive strategic approach. Going forward, stakeholders will look for diversity initiatives that include measurable goals concerning the composition of the board, the C-Suite and management pipelines—as well as a clear chain of accountability for reaching those goals.
Cancel culture is a looming threat to the bottom line.
Millennials of all races and ethnicities, and the younger generations coming up behind millennials, are demonstrating an intolerance for intolerance. They protest in the streets, and they protest with their wallets.
A company that enjoys a very diverse customer base may have reason for concern if the board and management team does not reflect their customer demographics. Young consumers, with increasing frequency, fight social injustices by launching “denial of revenue” attacks through social media boycotting campaigns. The disruption of a recent presidential campaign rally by TikTok users is a compelling example of the power young people have to mobilize and take action through social media. In more extreme cases, hackers will use technology to interfere with a company’s ability to deliver goods and services.
Boards may need to be prepared for social unrest and cultural shifts to impact the bottom line when companies appear to be out of alignment with the culture and values of their customers, employees or society at large.
I am hearing from CEOs who want to see meaningful progress towards diversity in corporate America. They see it as beneficial on a societal level and to the company bottom line. Diversity is not at odds with capitalism. Diversity, inclusion and equality will bring greater access to labor and talent pools, helping to catalyze the growth of companies and the economy.
