Fortune 500 boards still decades away from true diversity
Cid Wilson - CEO and President at Hispanic Association on Corporate Responsibility, joined Yahoo Finance to discuss the importance of board diversity.
Video Transcript
- To another important topic that we've been tracking very closely here at Yahoo Finance. That's diversity in the boardroom. Now there's a new report out from Deloitte and Alliance for Board Diversity. Now this is a coalition that involves the Hispanic Association on Corporate Responsibility.
And the report this time around shows that women and minorities continue to make progress in board representation for Fortune 500 companies, but there's still a significant ways to go. So we want to talk about all this with Cid Wilson. He's the CEO and President at Hispanic Association on Corporate Responsibility. And Cid, it's great to see you again.
And I was going through some of the findings of this report. Over 40% diversity, nearly quadrupling since 2010. So it certainly looks like we are taking steps in the right direction, but we certainly have a ways to go. What did we learn from this year's report?
CID WILSON: Well, thanks for having me back. It's always great to be here. So here are the key things that we need to recognize. One is we are moving in the right direction.
It's just not moving in the right direction at the pace that it should be, and particularly for minority women, particularly Black, Latina, Asian-American women, and minorities in general, people of color. It's just not moving at the level that it should. So while we're happy that we're seeing 40% diversity at over almost 200 companies and at least 30% diversity in about 350 companies, there are still companies that still have all white men, no women, no people of color on boards, and we need to do better there.
- Hey Cid, it's good to see you. In fact, you point out in the report that it'll take up to 2074 for the numbers to actually reflect the true level of participation within the society, within the boards. I want to ask you a question. We are friends. So if I ask it in a way that is incorrect or impolite, forgive me. But I had a--
CID WILSON: I love you, Adam. So no problem.
- --point out that in the case of, for instance, gender inclusion, that some companies think they're done once they bring women into the fold. But that people of color, specifically African-American, Black people, are so far lagging that companies are getting away. Well, we brought a woman in so, why do we need to keep going? Didn't we become diverse? Are you encountering that kind of phenomenon?
CID WILSON: So the answer is, is that in the report, you will see that there was a lot of board turnover, which means that there were many new board directors from 2018 to 2020. But when you look at who are getting on boards for the first time, you are still seeing very few people of color getting onto these boards for the very first time. And that is very concerning, because it tells us that the prioritization of diversity on boards is still not where it should be.
Because we know that there are ample number of women of color, men of color that are board ready, can serve on boards. They're just not getting selected, which is also why you'll see in the report that those who are on boards tend to serve on multiple boards. And so we need to improve and increase the breadth of people of color serving on the boards.
- So Cid, how do we do that? How do we work to expand the pipeline, and then of course, identify new candidates? Because I'm sure that there are so many candidates out there who are qualified for these types of positions.
CID WILSON: So it really is a multi-pronged approach. First, from the corporate culture side, that corporations must be intentional on looking to improve diversity on their boards. We know that 2/3 of boards are chosen by word of mouth. Only 1/3 are chosen by search firms.
And so that means, don't go to your board director next to you who might not be diverse and ask them who should serve on the board. Work with organizations like the Alliance for Board Diversity and organizations that are out there to really help promote them. Because we know, what I said, we certainly know that there are ample number of Hispanics to serve on corporate boards.
But people of color in general, Black, Asian-Americans, that it can be done. And then the second part is, is using organizations that are helping to fuel the pipeline. Today is our first day of our HACR executive programs.
This is our C-suite program. These are all board ready candidates. And leveraging them, we can help get them on boards, but the companies must be intentional.
- You just talked about the difference between word of mouth and the search firms, which actually are hired to go find and recruit board members. Would that perhaps be the way to go, though? To work with the search firms to approach the companies and say, look, you need to do this. It's not only the right thing to do, but it's for your economic best interests as well? Would the search firms play a bigger role in this, do you think in the future?
CID WILSON: There's no question that search firms can play a significant role. But here's just one of these industry secrets. Often companies go to search firms because they're looking for a minority, because they're having a hard time finding it themselves.
The big concern is those companies that are still using word of mouth. And so if you're a candidate trying to get on a board, while the search firm may be helpful, that's just 1/3 of the pie. You have to make sure that you're enhancing your executive network to be visible. But companies must do more so that you're picking ones that are from different industries.
So for example, 60% of board seats are usually CEOs, or former CEOs, or related ones. You know 20% are those with finance experience. The last 20 is everyone else. So we need to look at making sure that we're looking at IT executives, executives in the legal counsels, executives in corporate social responsibility, other areas where they can be enhanced. Because statistic after statistic, research after research shows that when you improve diversity, you improve performance at your company.
- Cid Wilson, always great to have you on. CEO and President of the Hispanic Association on Corporate Responsibility. We look forward to having you back.
