If nothing is broken, should we fix it? This is an age-old question that causes concern among people because it seems the answer is not intuitive. Most people should say “no”. Often they would be right. However, there are two specific circumstances in which we should say “yes.” First, when we become complacent, we need to disrupt ourselves before someone else disrupts us. Think Kodak. It dominated the film industry for over a century. What brought Kodak down? The rise of digital camera technology. Ironically, the digital camera was invented in 1976 by Steve Sassoon, a Kodak engineer. Yes, Kodak had the technology about 20 years before anyone else. However, they chose not to pursue this route as it would represent a huge capital investment and cannibalize their cinematographic activity. (Oops !)
UNITED KINGDOM – MAY 10: Make Do And Mend poster, 1939-1945 (Photo from the National … [+]
The second circumstance in which we should answer “yes” is when we do not see a problem, but others do. This is one of the biggest challenges we face when we talk about bringing diversity and inclusion to corporate boards. Most people think it’s a numbers game. It’s not. This is about adding a much-needed perspective to administrators’ thinking.
Diversity requires a change in our thinking
Unconscious bias and historical experience have shaped the way we think. Think about some of the things we do, like use a fork with our right hand and a knife with our left in the United States? Most people would say that’s how they were taught. However, this doesn’t explain why this is the “best” way to do it. Consider that the fork is the most used tool (especially since we point it at our face while eating.) It would seem logical that this person’s dominant hand would control the fork, right? However, that’s not how we’re taught it…and we don’t even really question it. Although this example seems innocuous, it is a pattern of thinking that applies to much of our lives, including the diversity of corporate boards.
Creative engineering, vintage illustration of a man’s head with an electronic circuit board for … [+]
CALPERS Investment Director Simiso Nzima has experienced this thinking modality first-hand. Nzima summarizes: “We have four main obstacles to overcome: process, criteria, pipeline and board turnover. » Let’s start with the process. Connections, meaning the people you know (as we’ve seen in previous articles in this series), are a central part of director recruitment. “If it’s a homogenous group looking for candidates, it will hinder diversity,” Nzima shares. He makes a powerful argument. As human beings, we are often part of different cliques. Because we are with similar people, we forget about the bubble we create for ourselves and may not seek out opportunities for growth. Next, we have criteria. Most boards of directors are looking for CEOs (or former CEOs). “Currently, there are only four Black CEOs in the Fortune 500, so if you’re looking for CEOs or former CEOs to serve on the board, that limits diversity,” Nzima says. Then the pipeline is a self-inflicted problem. At entry levels, companies have done a solid job improving diversity and inclusion. However, moving up the corporate ladder is a different story. Visibility, network and opportunity are still lacking, which is why mentorship and growth opportunities are so essential. Finally, the average renewal of boards of directors is more than ten years, which greatly limits the available opportunities. So what is the solution ?
CALPERS has a very interesting board model to address these challenges. Nizma shares that CALPERS “refreshes the board if a third has more than twelve years of service and ensures that a third of the board has less than six years.” CALPERS has also taken other steps to reach beyond the traditional pool to find diverse candidates and has implemented programs to create a pipeline of future administrators. One of the key triggers for CALPERS’ engagement was changing the way it thinks about its board. This is a major factor for organizations that have successfully built more diverse boards.
Going from a moment to a movement: changing the structure
“When you have power, it is very difficult to cede it to someone else,” emphasizes Ursula Burnes. Burnes is the former CEO of Xerox and has served on the boards of Uber, Chevron and American Express. His direct experiences showed a consistent power structure based on the favor of white men. Even when others burst into the boardroom, Burns has seen many become protective of their power and reluctant to accept too much change.
“There is hope,” exclaims Burns, “because shaking that promote diversity and civil rights.” The Me Too movement and the tragic death of George Floyd are shocks that highlight challenges and help drive meaningful discourse and action for change. “We must take advantage of the opportunities for change offered by these moments of crisis,” shares Burns, “to create momentum that will make going back impossible.”
There is no single solution that can change the structural issues surrounding improving diversity on corporate boards, but there is a combination of efforts and initiatives to get there. The Board Action Alliance and other groups have successfully created lasting change with the NASDAQ Rule. Through their visibility and lobbying, groups have influenced the state of California to adopt diversity requirements for the boards of directors of large corporations headquartered in the state. As Lin-Manuel Miranda eloquently wrote in Hamilton: “We must move from a moment to a movement.”
Getting There
Thanks to champions like Burns, Nizma, Barry Lawson of the Time Capsule Project and many others, we are turning these moments into movements. The combined effort goes beyond resolving the four major hurdles of process, criteria, pipeline and board turnover. It’s about breaking down the biases inherent in our systems to unlock the business value of diversity and inclusion. In addition, technology is becoming a strong ally in this movement. Emerging technologies like artificial intelligence (AI) are shining a light on our flawed processes and helping to improve them. Consider that the Financial Services Innovation Coalition co-published a white paper titled Artificial intelligence and algorithmic lending have the potential to reduce discrimination in mortgage lending. In a concerted effort to reduce racial bias in mortgage lending practice, they found that AI not only helped detect implicit bias within the system, but the bias-reduced algorithms applied by AI helped also improve accessibility and affordability for underserved communities. Next, we have the combination of social media and blockchain solutions to help board candidates connect, build relationships, verify their skills, and be highly visible in the pipeline. Thanks to virtual reality, aspiring board members now gain hands-on experience and training without having to wait for a real, accessible opportunity to present itself.
Surprisingly, this is just the tip of the iceberg when it comes to solutions for improving board diversity.
This article is part five of this series on diversity and inclusion on corporate boards and concludes the series.