In the last year, protests against racial inequality and the uneven effects of the coronavirus pandemic have thrust the lack of diversity at the top levels of business into the headlines. Now more than ever, customers, employees and investors are beginning to chastise companies that aren’t making an effort to introduce top-team diversity.
Most recently on Dec. 1 the tech-heavy Nasdaq filed a proposal with the Securities and Exchange Commission that would require companies to disclose their board’s diversity and to have at least two diverse directors. While the proposal remains unresolved, it was the latest high-profile sign that pressure to diversify corporate boards is mounting, especially in the tech sector, which remains mostly male-dominated.
The pressure isn’t only a demand for equity, either, as studies repeatedly show diverse boards performing better than homogeneous ones. As a result, more and more companies are beginning to turn to the “board diversity ecosystem,” which has been developing over the last decade or so. It is an ecosystem built on technological innovation.
As companies begin to broaden their search for board candidates, they have come up against a barrier that many see as insurmountable. The so-called “pipeline problem” refers to the sense that there are only so many qualified “diverse” board members out there, and that most of them are already on a board.
Fortunately, the pipeline problem is demonstrably untrue. The problem that is really on display — and it is the one that is easiest for technology to solve — is a networking problem.
Most board appointments rely on the “who do you know” approach of finding candidates. That has a tendency to limit board diversity because most of us know people who, for the most part, look like us. As a result, boards of predominantly white men are likely to have networks made up, predominantly, of white men.
Just because the pipeline problem doesn’t exist, though, doesn’t prevent the myth from having consequences. Although the percentage of women on boards has improved steadily (if slowly) as evidenced by the graph below, over the last decade, people of color have seen much smaller gains in the boardroom in the same time period.
Five years ago, gender diversity statistics on boards looked far worse. The Pacific Northwest — a region that prides itself on being progressive and forward-thinking — was lagging significantly behind board diversity in the rest of the country. These stark statistics prompted myself, Deanna Oppenheimer, Phyllis Campbell, and several other PNW business leaders to mobilize our networks and determine how we could help improve corporate board diversity in the Northwest and perhaps nationally.
Data and our collective discussions led Deanna, with the support of our collective networks, to create BoardReady.io, a not-for-profit seeking to catapult board diversity. We found that the most important technological innovations to board diversity are perhaps the least sexy: digital networks and data tracking.
Digital networks are instrumental in making introductions that would otherwise never occur. They greatly expand the pool of potential candidates and help show companies how many qualified, diverse board candidates are available to them.
BoardReady prioritizes data tracking and analysis. We’ve found that corporations are motivated to diversify their boards when they see how their board’s diversity compares with that of their competitors, and with national trends. More broadly, tracking those national trends help all board diversity organizations focus their board diversification efforts and track progress toward achieving board diversity.
Digital networks help companies to branch outside of their standard networks and discover new, diverse, candidates. Their scale shows just how deep the talent pool of diverse professionals really is, and they are integral to busting the “pipeline problem” myth. Nominating committees are often surprised by how many diverse candidates in BoardReady’s digital network are eminently qualified to serve on their board.
Because of their size, digital networks also provide the opportunity to be extremely selective. Rather than hoping that a personal connection is the right fit, tapping into a digital network means that nominating committees can stipulate experience that their board currently lacks and ensure that every candidate they meet fulfills that need. So many firms are doing this well right now, whether it’s Diligent, with a network of 700,000 business leaders and executives; the Athena Alliance, which also offers executive coaching to their network of women business leaders; or Nurole, which focuses specifically on connecting boards with board candidates.
The list of organizations that are helping boards diversify via digital networks is constantly growing, which is critical, because advancing board diversity is such a large task. No one organization is capable of solving this issue alone. There’s no single public policy, private initiative, or nonprofit that can move the needle on board diversity alone. It’s why we’re proud to have partnered with the organizations above, along with many others, because those partnerships are force-multipliers. They are integral to bringing meaningful, large-scale progress to the highest levels of business.
Other applications of technology go beyond making connections. Our ability to store and process data has advanced at a dizzying pace over the last several decades. As a result, advocates for board diversity have more information to make our case now than ever before. Data tracking is to board diversity what the Fitbit is to health goals. It reveals our starting point, which helps us make specific plans to improve board diversity for both individual firms and for the corporate world at large.
For example, at BoardReady, we’ve developed an automated analytic that rates a company’s board diversity, based on certain factors: gender, race/ethnicity, tenure, and age. It uses those factors to determine a board’s “BoardReady Index (BRI) Score,” between 1 and 100, which can then be compared to the BRI scores of peer companies. With it, we can also show corporations how that score will improve by adding a diverse board member.
The insight that such data tracking offers is particularly useful in light of regulations like California’s recent board diversity legislation, as many firms are being forced to diversify their boards quickly, some of which do not even know where to begin. Our analytic is entirely dependent upon technology, from the algorithm that computes the score to the databases that it pulls from, to its comparative power.
The coronavirus is making business more digital
Particularly in the era of COVID, when so much business is going online, corporations are more open than ever before to finding candidates through digital networks. As a result, many companies are discovering for the first time how deep the pool of exceptional, diverse director candidates really is. In addition, pressure to diversify is building as customers, investors, and even some government regulators are beginning to demand more board diversity, whether to address inequality, to achieve governance best practices, or to pursue stronger financial returns.
All of this means that we are experiencing an unprecedented opportunity to move the needle on board diversity. In the coming years, I expect technology to be leveraged even further to advance board diversity, in ways that we can’t yet predict. Technological advances over the last several decades have helped us prepare for this moment, ensuring that the next generation of corporate leaders is more diverse than ever before.
If you’re interested in partnering with BoardReady or learning more about board diversity, contact Jeni Elam at [email protected]