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Six Reasons Why Your Company's Board Still Isn't Very Diverse

Some companies are building much more diverse employee bases while their boards remain heavily white and male.

Six Reasons Why Your Company's Board Still Isn't Very Diverse

[Photo: Flickr user Simon Blackley]

Many companies are buckling down on their diversity efforts, some with better results than others. But most of those initiatives focus on employee bases, with few businesses giving the same attention to diversity at the board level. That's a problem. Here's why it persists and what it will take to fix it.

1. Most New Board Members Are CEOs And CFOs

In 2015, 73.2% of new public board appointments went to CEOs and CFOs, according to one industry report. Among last year's Fortune 500 companies, just 21 (or 4.2%) of CEOs are women, nine are Hispanic, and five are African-American. In fact, in the entire history of the Fortune 500, there have only ever been 15 African-American CEOs.

As long as new board positions go primarily to public-company CEOs and CFOs, women and minorities will continue to be largely excluded. Considering board members with different backgrounds, from academia to government and nonprofit sectors, would expand the slate of qualified women and minority candidates considered for leadership roles by corporate boards.

2. Many New Board Members Are Retirees

While age discrimination persists in many companies, we’re seeing the reverse at the board level: The average age for new board members is 58, and among active board members it's 63, according to the Wall Street Journal. Some 19% of directors are older than 69, but fewer than 1% are under 40. As one Bloomberg editorial puts it, "corporate boards shouldn’t be retirement homes."

While experience is valuable and retirees often have the bandwidth to devote to directorships, a well-rounded board should also include people well-versed in the latest technologies and trends—knowledge more likely held by younger, currently employed executives. In age and employment status, as with so much else, finding the right balance is key.

3. Many Believe That Only Engineers Really Understand Tech

There’s a well-documented shortfall in women and underrepresented minorities graduating from engineering schools, pursuing technology-based careers, and breaking through to leadership positions. Limiting (non-CFO and non-CEO) board appointments to candidates with engineering backgrounds is a sure route to continuing that trend.

There are plenty of brilliant business and academic leaders who didn't major in engineering but are still qualified to steer a tech business. Can you imagine anyone not wanting economics majors Sheryl Sandberg or Meg Whitman, or psychology major Mark Zuckerberg, on their corporate boards?

4. Most New Board Members Come From Other Board Members' Networks

According to a National Association of Corporate Directors survey, almost 70% of respondents acknowledged that their boards used personal networking or word of mouth to identify the candidate pool from which their newest director was chosen. And this happens even when search firms are hired to fill board seats because many firms are simply asked to rubber-stamp candidates that a board's network have already unearthed. Selecting directors from the board’s network is hardly a path toward diversity.

5. CEOs Prefer "Friendly" Bosses

It’s only natural to want your friends—or your friends' friends—as bosses. People in CEOs’ extended social circles are more likely to support the CEOs in their roles, create a safe place for them to execute their vision, and share common perspectives on how to achieve their goals.

This makes sense. Psychologists know that most people prefer to spend time with people who agree with them. But that’s not how good decisions are made. You need to weigh diverse perspectives. You need to be challenged. At the board level, that means that in order to thrive, CEOs have to be held accountable to board members who aren't their buddies.

6. Low Board Turnover Leads To Slower Change

The average board tenure among S&P 500 directors, according to one board services company, is eight and a half years. Think about how deeply most industries change in that time.

It’s hard to believe that most directors are still contributing after such a long time—but unfortunately there’s no way to know for sure, since most boards don't hold themselves to documented performance standards, nor do they conduct regular reviews on their members. Companies hold their employees accountable for their performances; they should do the same for their directors.

It doesn’t have to be this way. Instead of pale, male, and stale, let’s make boards diverse, effective, and innovative by expanding the job qualifications considered and modifying the practices used to find qualified candidates. That may not make for a cute acronym, but it should make for better business.

Valerie Frederickson is founder and CEO of HR executive search firm Frederickson Pribula Li. Clients include Facebook, Pinterest, Twitter, Uber, Tesla, SoFi, Microsoft, HP, Genentech, and other technology leaders.

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