Column: Making the business case for boardroom diversity: Ross Kerber

Jones Lang LaSalle Incorporated

25/09/2024 12:00

(The opinions expressed here are those of the author, a
columnist for Reuters. This column is part of the weekly Reuters
Sustainable Finance newsletter, which you can sign up for here)
    By Ross Kerber
       Sept 25 (Reuters) - U.S. corporate diversity initiatives
are losing steam by some measures like in the boardroom, where
fewer new S&P 500 directors are underrepresented minorities
according to global executive search and leadership advisory
firm Spencer Stuart.
    Among those troubled by the trend is Barry Lawson Williams,
a San Francisco-based investment consultant and boardroom
veteran.
    So Williams did something he has done before, this time at a
bigger scale. Starting in late 2023 he staged a series of
interviews with Black directors. The result will be called the
"100 Black Voices" video archive, which Williams plans to make
available soon via his website. 
    A big takeaway, Williams told me, is that nearly all his
subjects felt the case for diversity is best made on business
grounds rather than on appeals to justice or equity.
    "Sure it's a moral issue, but there's a business case for
diversity. Diversity improves decision-making and performance,"
Williams said.
    I told Williams what I've heard from people like Josh Ramer,
CEO of DiversIQ, which tracks diversity data, that studies show
mixed results on just how much workforce or boardroom diversity
improves financial performance.
    "It's hard to pinpoint it or put an exact number on the
performance," Williams said. "But I've asked people with a lot
of experience and they were firm in saying that diversity breaks
up groupthink, helps you avoid risks, and leads to more 
innovation."
    The U.S. Census Bureau estimates Black or African-American
people made up 14% of the population, and that 20% was Hispanic
or Latino. Blacks accounted for 11% of S&P 500 board seats and
Hispanics only 5% as of last year. Also, women held just 33% of
S&P 500 board seats.
    That won't change quickly. Women accounted for 42% of new
S&P 500 directors in 2024, down from 46% for 2023 and 2022. The
share of self-identified new minority directors fell to 26% this
year, from 47% in 2021 Spencer Stuart said.
    The decreases could show boards reaching goals as less than
one new seat becomes open each year per S&P 500 board, said
Spencer Stuart practice leader Julie Daum, even if they remain
committed to diversity.    
    Williams said his interviews offer lessons on all types of
diversity beyond just Black directors, who technically have
not-so-bad representation. He said boards could be well-served
to exceed the census ratios, but that he doesn't object to the
arguments of those who say boards should seek "viewpoint
diversity." 
    "I'm strongly against one-issue directors. But if someone
has a little more conservative point of view, I'm not blanketly
against that," Williams said.
    Williams said boards should review their recruitment
strategies and consider changes like term limits. His audience,
he said, include current and prospective Black directors and the
broader business community. 
    Williams was channeling key points from several taped
conservations he shared with me. Having boards better reflect a
diversifying U.S. population "is not about social justice, it's
about economic survival," said one of those interviewed, Herman
Bulls, Vice Chairman, Americas for JLL  JLL.N  and a member of
boards including the U.S. Defense Policy Board.
    The interviews were as much about management as diversity.
Directors shouldn't neglect their day jobs, said Bulls. Deborah
Wright, once leader of Carver Bancorp,  CARV.O  talked about the
value of humility and knowing when to follow up on an issue
one-on-one rather than in front of others.
    "I can't say how many times I've seen a director blow
themselves up by talking too much," she said. 
    More diversity won't happen without pressure from outsiders,
Wright said: "If the shareholders and the public institutions
don't press, it won't happen."

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 (Reporting by Ross Kerber; Editing by David Gregorio)
 ((ross.kerber@thomsonreuters.com; (617) 412 0093;))