* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
In more than six decades, there have only been 21 Black CEOs out of 1,800. Adding more Black executives to boards will increase shareholder value. Companies have been complacent for too long
By Tracy Porter, Founding Chairman of the Blacks on Corporate Boards committee for Boule, Sigma Pi Phi Fraternity; Founder and CEO of Premiere Solutions fleet management company.
Economic justice is tied to social justice.
It is urgent for diversity, equity and inclusion efforts to move past rhetoric into measurable outcomes. It is time to have more Black executives in board rooms and to hold companies accountable for their failures to be more inclusive.
Fortune 500 recently added two Black women to its CEO roster—Roz Brewer of Walgreens Boot Alliance and Thasunda Brown Duckett of TIAA. That adds up to five Black CEOs on the list this year.
A new Fortune 500 partnership, Measure Up, has 14 data measures to identify the top 20 Most Progressive Companies on Racial Inclusion. In more than six decades, there have only been 21 Black CEOs out of 1,800.
The fiduciary responsibility of a board is to enhance all shareholders’ value. Guaranteeing your board reflects the diversity of constituents and communities served accomplishes that.
According to Deloitte’s “Missing Pieces Report,” Fortune 500 board representation shows 80.7 percent of board seats were filled by white directors, with 59.6 percent filled by white men.
A separate Deloitte report found that companies with inclusion in hiring practices “generate up to 30 percent higher revenue per employee, are more profitable, and become eight times more likely to achieve positive business outcomes.”
Board members can enhance diversity in three ways. The first step is examining the cultural and racial identities of people in the organization. Answer definitively, collect data and report on diversity in the entry level, middle management, C-suite and board.
Secondly, all board members need to examine philanthropy. If you have a foundation, are you investing in communities of color and nonprofits that benefit Black men, women, girls and boys and how? Name the top five philanthropic organizations you supported in the last 12 months.
The third step is examining procurement. What does your supply chain look like; is there diversity in the ownership of businesses you work with and how are you increasing participation of Black businesses? This must move beyond tokenism and offer fair opportunities to Black-owned businesses, which have been disproportionately impacted by COVID.
Having more Black board members affects not only company performance but also individual wealth and community prosperity.
The Brookings Institute reports that in 2019 the median white household income was “$188,200 in wealth—7.8 times that of the typical Black household at $24,100. White households reported average wealth of $983,400, which is 6.9 times that of Black households at $142,500.”
More recently, the Federal Reserve reports in the second quarter of 2020, that “white households—who account for 60 percent of the U.S. population—held 84 percent, or $94 trillion of total household wealth in the U.S.. Black households—who account for 13.4 percent of the U.S. population—held just 4 percent or $4.6 trillion of total household wealth.”
More Blacks on boards of directors throughout the country can narrow—and move to eliminate—this wealth gap and racial pay gaps if all three of these steps are incorporated, reported and shared publicly.
The preponderance of white male board directors ends by challenging the CEO, chair of nominating committee and chair of the board to go to nontraditional places for talent and seek nominees from Black organizations.
Some entities are already working to be more inclusive, with mixed results.
The Billion Dollar Roundtable that counts among its membership Johnson & Johnson, Verizon, Bank of America, Walmart and others was founded 20 years to ago to recognize companies “spending at least $1 billion with minority and woman-owned suppliers.”
A March 2020 University of Illinois study found persons of color held about 15% of the boardroom seats in the state, though they account for 40% of the state’s population. Archer-Daniels-Midland reported 55% its 11 board directors were Black, Asian or Hispanic.
Nasdaq Inc (NDAQ.O) announced a requirement of listed companies to report on director diversity by gender, as well as Black, Hispanic and LGBTQ+. NASDAQ recently backtracked with amendments allowing a one-year grace period among other concessions.
Board members need to act and be transparent with results of DEI efforts. They need to make available data on outcomes of representation and inclusion claims on their boards of directors.
Adding more Black executives to their boards will increase shareholder value. Companies have been complacent for far too long.