Board diversity efforts continue despite pushback from some quarters.
Racial and ethnic diversity in the boardroom doesn't get as much attention as gender, but there's a growing movement to focus more on these groups.
But as with nearly every movement, there's always some sort of pushback and the accelerating effort to broaden the base of talent and diversity on public company boards has created a school of thought — and accompanying research — that suggests age, ethnic and gender diversity in and of itself does not contribute to higher earnings, increased shareholder value and deeper marketplace understanding.
But in this case the cat is out of the bag and there's no turning back on the benefits of diversity overall.
For example, according to Equilar research, 45% of large-cap companies voluntarily disclose board composition in terms of gender diversity, and about 40% do so in terms of race and ethnicity.
Equilar's report, which incorporated findings from Semler Brossy Consulting Group and KPMG's Board Leadership Center, acknowledges that the data on diversity may be skewed in that there is no legal requirement to make these disclosures and companies that do divulge this information have, according to Belen Gomez, Equilar senior director for board services, “a good story to tell.”
“Study after study has demonstrated a positive association between business results and boards that include women,” adds Susan Angele, senior advisor, board governance, KPMG's Board Leadership Center. “While racial and ethnic diversity are equally important to strong business results, there have historically been challenges to similar research due to smaller sample sizes and lack of disclosure. As an additional measure of diversity, sexual orientation has even less visibility.”
The research, however, “does show that diverse teams tend to perform better overall, and as disclosure of these facets of diversity becomes more common, the amount of research confirming the association between board diversity and long-term value is likely to increase,” she notes.
Large investors understand this.
According to a Corporate Governance Update published in September from Wachtell, Lipton, Rosen & Katz partner David A. Katz and consulting attorney Laura A. McIntosh, significant institutional investors and asset managers “are engaging in deliberate, proactive and effective campaigns for increased diversity on public company boards.” BlackRock, State Street Global Advisors and Vanguard all have taken public steps this year to promote and advocate for greater board diversity.
For example, BlackRock has noted that, “over the coming year, we will engage companies to better understand their progress on improving gender balance in the boardroom.”
And Vanguard, in an open letter, noted that one of the four pillars it will use to evaluate a public company's corporate governance is whether there is “a high-functioning, well-composed, independent, diverse and experienced board” with effective ongoing evaluation practices.
“If it once was a check-the-box exercise, board diversity is now a business priority,” says Blair Jones, managing partner, Semler Brossy Consulting Group. “Boards understand the importance of diversity in fostering better conversations, better representing employee and customer perspectives and driving better results. Boards want the benefit of diverse experiences and are becoming more open to sourcing them from less traditional backgrounds.”
Beyond ethnic and gender diversity, the “next big thing” regarding board service and the ever-watchful eyes of major investors may be renewed and vigorous calls to limit board service. The issue of directors who were on too many boards, known as “overboarding”, was red hot a few years ago because it was identified as a key contributor to ineffectiveness on the part of many directors.
Nearly four-fifths of S&P 500 companies already have policies in place to limit members' outside directorships, but directors should be mindful that no threshold has been established, thus making this concern a bit of a moving target. It may well be that less is more when it comes to board service.
Here's our “Directors to Watch” list, including directors who not only exemplify the very best of board service, but also bring racial and ethnic diversity to their boardrooms:
Charisse R. Lillie
Director, Penn Mutual Life Insurance Company, PECO
Charisse R. Lillie is the CEO of CRLCONSULTING LLC., providing corporate governance and diversity advice to corporations and nonprofits.
She was a senior executive at Comcast Corporation from 2005 to 2017, including service as the SVP of human resources of Comcast Cable and VP of Community Investment of Comcast Corporation. She was a partner in the law firm of Ballard Spahr LLC for 13 years, and was chair of the litigation department from 2003 to 2005.
Charisse is a member of the boards of the Penn Mutual Life Insurance Company and PECO, an Exelon Corporation. She serves on corporate advisory boards for PNC Bank and Independence Blue Cross.
She is a graduate of Wesleyan University, Temple Law School and Yale Law School.
Diversity at every level: The corporate boardroom is the scene of discussion of major issues such as diversity and inclusion, privacy rights of customers, assessment and management of risk, marketing to multiple generations of customers in the age of social media, use of big data to make decisions about product development, cybersecurity challenges and succession planning for company and board leadership. No board wants to run the company it serves; instead it seeks to be a transparent sounding board, giving strategic advice and focusing on financial growth and stability and superior management of risk. A company focused on growth, relevance and success will create and maintain a diverse and inclusive environment for employees at every level of the organization.
William H. Osborne
Director, Quaker Chemical Corporation
William H. Osborne serves on the compensation and governance committees of Quaker Chemical Corporation. He was named senior vice president of Global Manufacturing & Quality for Navistar in August 2013. Osborne joined Navistar in May 2011 as senior vice president of custom products, where he was accountable for the Navistar RV and Workhorse businesses. Previously, Bill was on Navistar's board of directors, and was also a member of the board's finance committee.
Before joining Navistar, Osborne was president and chief executive officer at Federal Signal Corporation, a diversified manufacturer of safety and security products, serving also as a member of the Federal Signal board of directors. Prior to that, he spent more than three decades at the Ford Motor Company.
He also serves on the board of trustees of Rush Medical Center and the Lyric Opera of Chicago.
Lifelong learning is key: Today’s directors must stay ahead of the accelerating pace of change in today’s business landscape. Without a commitment to lifelong learning, you run the risk of becoming obsolete in a very short period of time.
Ana Dutra
Director, CME Group, Greeley & Hansen, Lifespace Communities
Ana Dutra is the CEO of the Executives' Club of Chicago and founder of Mandala Global Advisors. As former CEO of Korn/Ferry Consulting, Ana created a $350 million global business through organic growth and acquisitions. Some of the boards she sits on are the CME Group, Lifespace Communities, Greeley & Hansen, Committee of 200, International Women Forum, Children's Memorial Hospital and Blessings in a Backpack.
A Brazilian with 30 years in P&L management, turnarounds and M&A in 25 countries, Ana helps boards and CEOs to identify and execute growth strategies through innovation, acquisitions and new technologies.
Ana holds a Kellogg MBA, a master's in economics from PUC and a juris doctorate from UERJ in Rio de Janeiro. She is a recipient of the Executives of Color Leadership Award from Chicago United and Verizon's Nueva Estrella Latina.
Asking the right questions: When boards model excellence in governance and a strong partnership with operating leaders, organizations thrive, delivering increased value for customers, employees, suppliers and shareholders. World-class governance starts with the board's understating of industry, economic and technology trends, potential risks and disruptions. By asking the right questions while demonstrating a productive partnership with senior management, boards add tremendous value for organizations. Board diversity in terms of gender, industry and functional background as well as experience and ethnicity is crucial. Finally, boards play a critical role in CEO succession, compensation and development as we are ultimately accountable for ensuring effective leadership in organizations.
Joanna Lau
Director, DSW
Joanna Lau is founder and CEO of Lau Technologies, a technology development company. Lau Technologies was the first to introduce facial recognition technology into the driver’s license and secure document markets. The division went public as Viisage Technology, now a division of BAE of U.K.
Joanna is a director of DSW, a leading multi-channel retailer of branded footwear and accessories. She chairs DSW's technology committee and is a member of the audit committee. Joanna’s previous public board experiences included ESI, TD Bank, FSI International and InfoSoft. She is also a member of the board of JFK Library Foundation and the National Defense Association.
Joanna was named EY National Entrepreneur of the Year and went on to serve as a judge.
Good governance is built on trust, respect and transparency: With the right kind of chemistry, the board can debate strategic decisions openly and constructively. Board members must be able to build trust amongst themselves and the management team. Board members must respect one another's skills and expertise. To trust and respect will open the channel of candid communication amongst directors and management team. Having candid conversation and transparency can help reach consensus through mediating differing interests on what is in the best interest for our stakeholders.
Janet E. Jackson
Director, Installed Building Products
Janet E. Jackson spent 14 years as president and CEO of United Way of Central Ohio. Before that, she served six years as Columbus City Attorney and nearly 10 years as a judge on the Franklin County Municipal Court. She holds a B.A. from Wittenberg University and a J.D. from George Washington University.
Just a few of her many honors and awards: Allies of Equality Award from Equality Ohio, Woman of Achievement Award from the YWCA of Columbus, and the Dr. Martin Luther King, Jr. Humanitarian Award. She was inducted into the Ohio Women's Hall of Fame in 2001 and the Columbus Hall of Fame in 2017.
Janet is member of the boards of Installed Building Products, Wittenberg University and the Columbus Jazz Arts Group.
Fostering the future: A key component of a company's continued success is investment in their future leaders, their employees and the community. A forward-thinking board must continually consider who makes up the next generation of their leadership; and beyond that, ensure they are a diverse group, in experience, gender, ethnicity and expertise. By focusing on the development and well-being of their workforce and investing in the community that surrounds them, an organization not only has a better chance of retaining their employees, but building a dedicated and loyal team to carry them through to the future.
Pamela Coe
Director, Expedia, Inc.
Pamela Coe is a senior executive, legal counsel, board secretary and corporate director for Fortune 500 companies in the media, ecommerce and technology space. Providing sound business and legal advice in fast-paced, sophisticated and entrepreneurial business environments are hallmarks of her career.
As a senior executive at Liberty Media Corporation and Liberty Interactive Corporation, she is actively involved in executive leadership of the Liberty organizations. As board secretary to Liberty's four public companies she is a primary contact and senior adviser to members of the board of directors concerning corporate governance, securities law, executive compensation and regulatory compliance matters.
Coe has served on the board of Expedia, Inc. since 2012 and has been a member of Expedia's compensation committee since that time.
Encourage and facilitate open and robust communication: Recent events have proven that boards composed of experienced, well-respected directors can become embroiled in controversy due to corporate compliance failures, ethical lapses and cybersecurity missteps. Invariably, these directors are subjected to intense and unexpected criticism for these failures. It is critical that board members exercise their oversight responsibilities to minimize these risks by, among other things, regularly interacting with senior management outside the boardroom to obtain as broad a view of the company's business as possible. Robust two-way communication should be the norm. In addition, regular interaction with senior management of the company will assist board members in discharging their other responsibilities, including succession planning and executive compensation decision making.
Lloyd Johnson
Director, Apogee Enterprises, Inc.
Lloyd Johnson is an experienced finance executive, global leader and corporate board member. He served as global finance and audit managing director at Accenture Corporation. His career spans 35 years in senior financial leadership positions with large multi-national enterprises.
Johnson, a CPA who holds an MBA in strategy and finance from Duke University's Fuqua School of Business, serves on the Apogee Enterprises, Inc., (audit committee) board. He is an National Association of Corporate Directors (NACD) Board Governance Fellow and leverages his expertise in finance, risk, acquisitions and global operations in board service.
Johnson is a member of the AARP national board and serves as chairman of the AARP Foundation board. He has received numerous awards and recognitions during the course of his career and was named one of the “Most Influential Black Corporate Directors” (Savoy magazine, 2017).
Leveraging insight: In support of the organization's strategy, high-performing boards must proactively invest time and resources to build and maintain in-depth knowledge of key global operating, competitive and regulatory environments. This includes developing and periodically refreshing board members' understanding of products, services and capabilities, culture, market trends, significant risks, and innovations. Properly managed, the resulting knowledge improves working relationships with management and the overall quality of oversight, capital investment decisions and advisory recommendations. The ability to leverage insight, based on sound organizational and industry knowledge, is essential to driving consistent superior board performance and enhancing long-term shareholder value creation.
James Lam
Director, E*TRADE Financial
James Lam is a noted risk expert, best-selling author, and experienced public and private corporate director. He is president of James Lam & Associates, a risk management consulting firm. James serves on the board of E*TRADE Financial, where he is chairman of the risk oversight committee and a member of the audit committee. Previously, he has served as partner at Oliver Wyman and chief risk officer at GE Capital and Fidelity Investments.
James' latest book, Implementing Enterprise Risk Management, was published by Wiley in March. He was recently named in the 2017 NACD Directorship 100. Treasury & Risk named him in “100 Most Influential People in Finance” three times. The Global Association of Risk Professionals honored James as the inaugural “Risk Manager of the Year.”
Collaboration is a precondition for diverse boards to deliver on their promised value: As an Asian-American director, I am glad to see empirical studies showing that diversity enhances board effectiveness and corporate performance, however, diversity on its own can be ineffective and even counterproductive. Collaboration is the “secret sauce” that enables a heterogeneous group of accomplished directors to address complex issues, contribute different perspectives, engage in healthy debate and converge on the right path forward for the organization. From strategy to risk oversight, collaborative diversity produces more innovative solutions and reduces potential blind spots.
Sandra A. J. Lawrence
Director, Westar Energy, American Shared Hospital Services
Sandra A. J. Lawrence has served as a corporate director since 2004, beginning with Westar Energy (WR), where she chairs nominating and governance and serves on the compensation committee. Recently she was elected to the board of American Shared Hospital Services (AMS). She received an MBA from Harvard Business School, an M. Arch from MIT, and an AB from Vassar.
Her past positions as president of Stern Brothers, VP/administration for Gateway, chair of the Kansas Bioscience Authority, chair of the Greater KC Community Foundation, and others, provide her with a diverse knowledge base and a broad perspective.
An NACD Leadership Fellow, her current board positions include the Kansas City chapter of NACD, the Hall Family Foundation (audit chair and investment committee member) and the Nelson-Atkins Museum (audit chair) and others.
Creating an environment for new ideas: A critical task is to hire well, considering the skill sets needed, diversity and the industry's environment. This pertains to the hiring of directors and the CEO. If we do this, being careful to seek people with appropriate expertise, broad perspectives and strong collaboration skills, we will create a boardroom environment that can invite new ideas by directors and staff, and one that can be thoughtful, rigorous, appropriate, forward-thinking and productive. Having done that, the board must regularly assess itself, given its current environment, and must resist the urge to step too far into the operations of the organization.
Chris Lee
Director, Matthews Asia Funds, The Asian Masters Fund Ltd.
Chris Lee is a senior partner at FAA Investments, a private investment group focusing in alternative strategies. In his prior experience, Chris was an investment banker for almost 20 years at Deutsche Bank AG, UBS Investment Bank AG and Merrill Lynch & Co.
He is an independent board member with Matthews Asia Funds, the largest U.S. investment company ('40 Act) with a dedicated focus on Asian equities. He also is an independent board director for The Asian Masters Fund Limited, a public company (ASX: AUF) listed in Sydney, Australia.
Since 2016, he serves on an advisory committee of corporate governance which convenes a group of 40 corporate directors annually to meet at the Salzburg Global Seminar. The group develops ideas and goals to better serve people and our planet while still growing profits.
International best practices can be useful: Directors must bring both a global strategic perspective and a focus on near-term priorities. An important role for boards is to guide a company's strategic direction in our fast-expanding global marketplace. To improve corporate governance, directors must evaluate international best practices, such as the U.K. Stewardship Code, on long-term strategy incorporating all stakeholders' values, not just shareholders! Strong directors are courageous leaders who look ahead for ways to benefit both the peoples of our planet and company's profit growth.
Lou Nieto
Director, AutoZone, Ryder, Fresh & Ready Foods
Lou Nieto is president of Nieto Advisory, an advisory firm focused on small food businesses. He retired in 2009 as ConAgra Foods' consumer foods president after serving as president of ConAgra Meats in 2005. He was previously CEO of the Federated Group, a consumer products business, a group president at Dean Foods and Mission Foods EVP. He also spent 10 years with Kraft Foods and five years with Quaker Oats.
He has served on the Ryder and AutoZone boards since 2007 and 2008, respectively. He is Ryder's finance committee chair and on the audit committee at both boards. Lou also serves on the Fresh & Ready Foods board, a fresh foods business.
Lou earned an MBA from the Harvard Business School and a B.A. from the University of Chicago.
He has been involved nationally to increase educational opportunities for disadvantaged youth and serves on numerous nonprofit boards.
Look beyond the Fortune 1000 for new talent: Corporate boards struggle to identify strong candidates to meet increasingly refined experience and skill parameters in order to strengthen their ranks. The interest in diversity further complicates this struggle. A significant contributor to this challenge is the limiting preference for Fortune 500 or 1000 experience. There is a very large pool of qualified candidates who are managing smaller corporations just below the Fortune 1000 level. These candidates are also much more diverse and bring innovative, entrepreneurial approaches. Boards would be wise to look beyond the Fortune 1000 for new board talent.
Molly P. Zhang
Director, Newmont Mining, Cooper Standard Holdings,
XG Sciences
Molly P. Zhang, Ph.D., is an innovative global executive with in-depth expertise in chemical, mining service and other industrial sectors. Born and raised in Shanghai, educated in Germany, Molly worked around the globe and gained extensive experience in China market penetration, global operations and joint venture management.
Previously, she served on the boards of Inenco Group and a dozen joint ventures. Currently, she is a board member of Newmont Mining, Cooper Standard Holdings Inc., XG Sciences and a member of supervisory board for GEA Group in Germany.
During her 22-year career at The Dow Chemical Company, Molly held a variety of senior positions including Business VP, managing director, for mega joint ventures, head of Asia Pacific manufacturing, and global technology director. Subsequently, she also served in executive roles for global operations for Orica, a leading mining service company.
Disruptive forces can blindside you: We are facing unprecedented digital technology transformation and a complex geopolitical landscape. Disruptive forces could come from an unrelated industry or geography. Corporate culture, innovation strategy and a relevant talent base could be the differentiators to create superior longer-term shareholder value. Corporate boards should use their collective knowledge and wisdom to guide the company’s strategy development, define a winning corporate culture and proactively manage risk to ensure success.
Ekta Singh-Bushell
Director, TeleTech
Ekta Singh-Bushell serves on the audit committee of TeleTech (NASDAQ:TTEC), a global leader in customer experience, and is board advisor to start-ups. Her extensive global, multi-sector operating expertise in finance, audit, digital, technology and cybersecurity provide necessary and desired skills, experience and perspective to public, private and start-up boards.
Formerly the chief operating officer executive office, at the Federal Reserve Bank of New York and a 17-plus-year veteran with EY, Ekta served in various leadership roles, including global client services and managing partner roles as global and Americas IT Effectiveness leader. She has multi-sector strategy, business launch, P/L and board service experiences, having worked in more than 40 countries, including India, London, and the United States.
Ekta is a member of WCD, NACD and Ascend Pinnacle. She has a CPA, M.S. in Electrical Engineering & Computer Science from UC Berkeley and advanced certifications in governance, cyber-resilience, information systems security, audit and control.
Navigating the blurred lines between digital and non-digital strategy: Boards are usually veteran business executives offering not just oversight, but insight, wisdom and advice. That same masterful wisdom is often challenged when it comes to the blurred lines between digital and non-digital strategy. Digital, that “suitcase” word we've been living with for the last two decades, continues to disrupt, transform and evolve business models, be it wholesale or fringe. The resulting innovation poses enormous challenges — agility, competition, customer engagement, scale, talent, and ever increasing cyber risks and uncertainty, requiring increased shareholder scrutiny. Boards today have a vital role to play in digital strategy and business transformation as partners and advocates to operating leaders.