Diversity and Inclusion — On the Board, in Management, in the Company
By Directors and Boards

Going beyond gender diversity.

Board diversity has now become a legislative — and exchange — issue. California and New York have adopted legislation outlining director diversity mandates. More recently, the Nasdaq stock exchange petitioned the SEC to adopt a new listing rule that mirrors the California legislation.

“It’s not good enough just to say we got a woman on the board — typically a white woman — and the job’s done,” says Anne Simpson, managing investment director of board governance and sustainability for the California Public Employees’ Retirement System (CalPERS). The system is responsible for $440 billion in investments.

When searching for new directors, companies should consider board diversity to be as important as a good mix of professional skills, says Michelle Hooper, a director of United Airlines and United Healthcare Group. “Boards are becoming much more intentional and saying, ‘We want to bring that ethnic or racial diversity into our boardroom. We want these types of skills. We are not going to fill that seat until we get an ethnically diverse candidate to fill it.’ You are not compromising the quality of your board by waiting. I can’t say that enough.

“There are great people out there. You just have to go out and find them.”

But the work doesn’t stop there. Boards must also pay attention to inclusion — bringing a director into important conversations and the culture of the boardroom.

“Just because somebody offers you a board seat doesn’t necessarily make you a fully accepted director,” Hooper says. “There’s a process by which that happens, and you need to be very aware and conscious of that. And as we make our boardrooms more reflective of the country, of our products and of our stakeholders, we need to be very aware that the prominent voice can no longer be the white male or the white female. We have to bring all of those voices to the table.”

Simpson stresses the need for transparency. One way to accomplish that is through reporting.

“We need to have a reporting regime which captures all of these human capital management issues that we’re talking about — the template is there from the SEC’s Investor Advisory Group, to show how investors want this information and want it organized,” Simpson says. “We want it to include all elements relevant to diversity, equity and inclusion, including recruitment, retention, training, health and safety, pay equity which the research tells us are relevant to long term value creation.”

Hooper would like to see mentoring and career acceleration opportunities offered to people from underrepresented communities, similar to the programs that have been developed for women.

“If we could do the same thing for other ethnicities long term, I would be happy,” she says. “If we were able to have robust programs and robust processes, we would also see those pathways going forward. But it’s going to take us a while to get there.”

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