Dispelling Myths On The Barriers To Minority Representation On Corporate Boards – Forbes

Op-ed co-authored by Todd Sears, Founder & CEO of Out Leadership, with research from Quorum, Out Leaderships LGBTQ+ Board Leadership initiative, and Esther Aguilera, CEO, Latino Corporate Directors Association (LCDA).

Representation of minorities on corporate boards is still at staggeringly low levels. Through our respective organizations, and with support from our partner firm, Equilar, weve conducted extensive research into the state of minority representation and what can be done to move the needle toward more inclusive Boards.

By any measure, Latinos are the least represented racial and ethnic group in the nations boardroomsleaving 87 percent of California-based public company boards dangerously disconnected from their customer and employee base. As an example, Latinos make up almost 40% of the population of California, but only 2.1% of California-based Boards. Similarly, over a five year period, openly LGBTQ+ representation on Boards only increased from 10 to 25, (Source: Visibility Counts: The LGBTQ+ Board Opportunity) representing an alarmingly low 0.2% of all Board seats. Compare this to the latest Gallup poll that estimates that 5.6% of Americans identify as LGBTQ+.

Recent legal and regulatory changes alongside private sector initiatives such as Goldman Sachs new board diversity requirement to take companies public have attracted considerable public attention to the minority Board representation gap, but also fierce resistance to change. In this context, Todd and Esther felt it necessary to dispel four of the most damaging myths on minority Board representation.

Myth 1. Race and Sexual Orientation do not matter in Directors selection: it is an equal level playing field

Some opponents to Californias AB979, which requires publicly-traded companies headquartered in the State to have a minimum level of Board members from under-represented communities, or to NASDAQs recent proposal to require listed companies to have diverse directors, pointed out that discrimination in employment on the basis of race or sexual orientation is already illegal in the United States. They used that argument to condemn mandated Board diversity as grandstanding of identity politics, political correctness and virtue signaling, claiming: we are all individuals and not defined by a set of stereotypes. Yet, the data mentioned above clearly shows that it is not the case. While Todd and Esther do not believe that companies or recruiters act in bad-faith or are proactively discriminatory, significant barriers to fair representation on corporate boards exist, including lack of access to the informal networks through which most Board seats are filled; a focus by companies on targeting a limited, largely-homogeneous pool of candidates (such as current and former CEOs and directors of public companies, who are overwhelmingly male, white and straight); the scarcity of Latinos and LGBTQ+ Board members serving as role models; as well as the more subtle question of trust and comfort. All these factors perpetuate a vicious cycle of exclusion which can only be broken by concerted efforts including by legislators.

Myth 2. Mandated diversity on Boards will bring unqualified directors

Stereotypes about aptitude and capabilities are another key barrier in diversifying corporate boards. In-group members will favorably assess the credentials and accomplishments of their own members, ascribing them to intelligence, drive, and commitment. Meanwhile, the credentials and achievements of out-group members are seen as unmerited, and due to a fluke or preferential treatment. (Molina, 2018)

Research such as the Edelman Trust Barometer shows that people trust people like themselves. That is much more a barrier than the real aptitudes and achievements of LGBTQ+ and Latino aspiring directors. In fact, both Quorum and LCDA boast hundreds of exceptional board-ready candidates. The argument that mandated diversity will bring directors that are not the most qualified candidates to the Board is simply proven wrong by recent appointments. Moreover, the idea that promoting diversity means ignoring merit has always been a code to justify exclusionary practices and a defense of the status-quo. However, both Quorum and LCDA are confident that mandated diversity will also encourage companies to identify, develop, promote, and retain suitable minority talent for the corporate board leadership structure, strengthening the existing pipeline. Out Leadership offers its members firms talent initiatives that are built to promote LGBTQ+ people in leadership positions.

Myth 3. Where will the slicing and dicing end?

Disability, veteran status, race, gender, sexual orientation, gender identity Where do we stop, and on what basis? Fabrice Houdart, who co-leads Quorum at Out Leadership caricatured that argument in a recent piece titled Whats next? Redhead quotas on corporate boards?.

While we understand that policies weighing minority status in Board members' selection might create a sense of unfairness and sometimes cause people to question whether they or their peers were admitted because of their minority status, the alternative of having homogeneous Boards composed exclusively of dominant groups is worse. In response to AB979, there was a rather interesting piece on the discrimination faced by people of Middle Eastern and North African (MENA) descent in the US today. We feel that companies should take it in consideration. Similarly socio-economic background is another area which is relevant to the modern corporate Board. If we truly want Directors to be the best and the brightest in business then we need to reopen Board candidate slates to the whole of society and use criteria that actually reflect the capacity to represent a wide variety of opinions and experiences.

Myth 4. Mandated diversity is anti-constitutional and a threat to capitalism

The legal consensus is that laws such as AB979 are constitutional because the state interest is compelling and a Board position is not a common occupation. I prefer to leave markets to reach equilibrium on their own is another frequently heard argument when it comes to diversity mandates. If there is one lesson from progress achieved in gender representation on corporate Boards, it is that the regulator has to step in. Legislation generated the most substantial change to the representation of women on boardsfar greater than any other effort. The 2020 Women on Boards found that the U.S. states where a diversity law was mandated or is in progress added more female board directors versus the states that did not make any such announcements (see Board Diversity: No Longer Optional). In addition, the threats of delisting, going private, or registering in another country never concretized. Californias SB826, which preceded AB979 and required minimum levels of gender diversity on the boards of public companies in the state, also faced fierce opposition which has by now largely disappeared; nearly 96% of California public companies have satisfied the laws requirements. Clearly good intentions are not enough given the abysmal LGBTQ+ and Latinos representation on Boards, when the Quorum initiative celebrates its 5th year of advocacy and LCDA has been around for 10 years.

Both Quorum and LCDA believe it is important to listen to the voices that resist Board diversity efforts and continue to articulate the business and economic case. Ultimately, the best way to dispel myths on minority representation will be the success and valuable contributions of the cohorts of Latinos and LGBTQ+ Board members which might have an opportunity to serve, thanks to these latest developments.

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Dispelling Myths On The Barriers To Minority Representation On Corporate Boards - Forbes