Latino representation is lacking on Fortune 1000 boards.
As board leaders strive for greater diversity among their members, the conversation often focuses on gender. While there are a variety of reasons for attention on gender balance, other aspects of diversity — such as race and ethnic background — also are beneficial in the boardroom. Diversity of racial and ethnic background may be just as important as gender diversity, and nominating committee chairs should ensure they are expanding their director candidate pools beyond the white men who have traditionally filled director seats.
One reason diversity contributes to board effectiveness is that directors from different backgrounds bring perspectives to board deliberations that are influenced by their life and work experience. Board leaders should consider whether their board composition reflects the markets in which their company operates. According to the U.S. Census Bureau, Latinos constituted just over 18% of the U.S. population in 2019. The Pew Research Center projects this percentage will grow to 29% by 2050. Given this expected growth, director candidates of Latino heritage are likely to be in high demand. However, a study released by the Latino Corporate Directors Association (LCDA) and the KPMG Board Leadership Center shows a lack of representation of Latinos in U.S. boardrooms, finding that only 2.7% of board seats at Fortune 1000 companies are held by men or women of Latino heritage (hereinafter referred to as Latinos, despite gender, unless otherwise noted).
Cultural influences on purchasing patterns, employment decisions and team dynamics may be missed when boards lack directors from the racial or ethnic groups that are important to their long-term strategy and sustainability. Therefore, the importance of the Latino community should be taken into consideration when evaluating board composition. Latinos’ contributions to the U.S. economy are significant and are expected to grow dramatically in coming decades.
Consider these facts:
· A September 2019 article on CNBC.com reports that Latinos accounted for 82% of the growth in U.S. labor-force participation between 2010 and 2017.
· Citing data from Nielsen, NBC News reported in August 2019 that the gross domestic product (GDP) among Latinos has grown at a faster rate than the overall U.S. economy, from $1.7 billion in 2010 to $2.3 billion in 2017.
· According to the L’Attitude Fact Book citing numerous studies, the purchasing power of the Latino community is expected to top $1.9 trillion by 2023.
However, few Latinos serve on the boards of companies that depend heavily on the Latino population as customers, employees and business partners. Of course, while it is not only those companies that should consider Latino director candidates, they may reap greater benefits from including the perspectives of Latinos in the boardroom.
For example, the 2019 L’Attitude Fact Book notes that “Latinos are leaders in the use of technology.” However, companies in the technology industry have the lowest Latino representation in the boardroom. Only 12.6% of the technology companies among the Fortune 1000 have a Latino on the board.
Even for companies headquartered in states with large Latino populations, Latino representation on boards is low. Most notably, according to the World Population Review, 38.9% of Texas residents are Hispanic, but only 2.2% of the directors serving on the boards of Fortune 1000 companies headquartered there are Latino. Similarly, only 2.3% of the directors of Fortune 1000 companies headquartered in California are Latino despite the fact that 38.8% of state residents there are Hispanic.
Taken together, these facts highlight the importance of including diverse experiences and skills in the boardroom and throughout an organization to help drive financial performance, and to cultivate and reinforce a culture that can successfully execute its strategy.
Annalisa Barrett is a senior adviser with the KPMG Board Leadership Center and Jose R. Rodriguez is a partner, KPMG Audit Committee Institute, and a member of the Latino Corporate Directors Association’s board of directors.