The Conference Board Governance Center Blog


Board Diversity: Are We Walking or Just Talking?

By Robert B. Lamm, Senior Fellow, Governance Center at The Conference Board

Last year, I led a discussion on board diversity for a group of a dozen or so public company directors. The group was remarkably diverse – a mix of men and women of various races and ethnicities. I wasn’t sure how to get the conversation going, so I decided to lead off with a potentially provocative question: “Do you think that public companies are sincere when they say they believe in board diversity?” There was an awkward silence for a few minutes, but finally one of the attendees – a woman, of course – said “no.”

The good news is that the discussion that followed was robust and passionate and didn’t require much leadership from me. The bad news, of course, is the candid answer that led to the robust and passionate discussion.

Which leads to the title above–when we discuss board diversity and all it implies, are we merely talking the talk or are we walking the walk?

The Evidence

We have certainly made progress, at least in some respects. According to the 2015 Spencer Stuart Board Index, women comprise 20% of the boards of the S&P 500 companies, up from 15% in 2005. But that’s not exactly a mind-boggling increase.

Minority representation on boards has improved as well. The 2015 Spencer Stuart Board Index points out that of the 376 new independent directors elected in 2015, 18% qualified as members of a “minority” (African-American, Hispanic/Latino and Asian). However, the Index also notes that minority representation among the largest 200 S&P 500 companies held steady at 15%, and the percentage of the top 200 companies with at least one minority director actually declined–from 90% in 2005 to 86% in 2015.

In other words, the evidence yields mixed results, suggesting that we are talking but not necessarily walking.

The Basics

Maybe this is as good a place as any to ask a basic question: What is diversity? Anecdotally, today’s discussions about board diversity seem to focus on gender diversity. My hunch–again, anecdotal–is that this stems, as do many of our governance initiatives, from trends in Europe, particularly northern Europe. (Remember that Norway was among the first countries to mandate that a specified percentage of public company directorships must be occupied by women.) I have nothing against Europe or northern Europe, but that part of the world is not exactly the most racially/ethnically mixed. So it’s not surprising that the focus of diversity would be gender-based.

I also have nothing against women; in fact, I think women make great directors (among other things, when a woman isn’t sure how to get where she’s going, she asks for directions) and that we need to achieve gender balance on boards. However, that still leaves open the question of other forms of diversity, including racial/ethnic and otherwise. Moreover, as much as we need gender and racial/ethnic diversity, we also need diversity of thought and experience.

Imagine a board comprised of 10 people, five men and five women, representing a variety of races, national origins, etc. If that board consisted entirely of people who currently or previously served as CEOs, it’s my view that the board would not be diverse. On the other hand, if the same board consisted of people who had different careers, experiences and skill sets, now you’re talking.

It seems to me that it’s precisely the homogeneity of directors’ background and experience that has contributed to the lack of gender, racial and other forms of board diversity. After all, if the only thing a company looks for when filling a board vacancy is a current or former CEO, it’s not likely to find too many people of color or even too many women. That may, and hopefully, will change in time, but we’re not there yet. Instead, I think companies would be wiser to look for people with experience in a wide variety of disciplines such as human resources, academia, law, the non-profit community and so on because of the different perspectives they bring. If companies were to seek out people with these different backgrounds, their boards would likely be more diverse in more ways than “merely” with respect to gender, race, etc.

Is There a Business Case for Diversity?

The diversity of companies’ approaches to diversity is surprising. Some seem clearly to embrace diversity. However, others seem to be rapidly moving towards the 18th century–no women, no people of color, etc.; just old(er) white men–also known as “stale, male and pale.” Some of these companies say they’re working on it. However, there are still philistines out there who seem to have no interest in diversity. When I ask these companies what they’re doing about diversity on their boards, I get dumb stares or comments like, “that’s not a priority” or words to that effect.

I know that board diversity is a good thing; call it faith, or whatever, but I know it. However, companies lacking the blind faith that I have want visible, tangible proof that diverse boards yield better companies. And that is very hard–maybe impossible–to prove.

The good news is that there have been a number of studies supporting the relationship between board diversity and company performance. The bad news is that these studies show correlation but not causation. For example, a study a while back showed that companies with women on their boards fetched a higher price when they were sold than companies with no women on their boards. At least as reported in the press, the study “proved” that women were better negotiators than men. While my family experiences confirm that “fact,” I’m not sure the study proves that at all; for example, did the female board members actually negotiate the price? And if I can figure out the fallacy of that “proof,” so can companies for which board diversity is not a priority.

It may be that there is no way to “prove” that diversity enhances performance, results, sales prices, etc. However, we may be at or close to a tipping point where study after study showing correlation may make it pretty clear that the connection is causative as well.

In the meantime, companies for which women represent a significant constituency–as customers, suppliers or otherwise–seem to be increasingly aware that having that constituency represented on their boards is a sufficient business case for gender diversity, if not other forms of diversity.

The Disclosure Factor

Sunlight in the form of disclosure may be a great disinfectant, but disclosure can do more than disinfect;it can lead to changes in behavior. For example, public companies are not actually required to have an “audit committee financial expert” on their audit committees. However, since a company without such an expert has to explain why it doesn’t have one, every company I’ve ever encountered strives to get one.

Public companies have been required to provide disclosure about board diversity since 2010 as part of the SEC’s proxy disclosure rules. However, the disclosure requirement has had little if any impact on behavior, possibly because of its nature. Specifically, when the SEC adopted the current disclosure requirement on board diversity, it was added to other board-related disclosure requirements at the last minute.  As a result, the diversity requirement was never subjected to public comment, did not define “diversity,” and seemed to require disclosure only if the company had a diversity “policy.”

When companies failed to provide the disclosure because they had no policy, the SEC clarified that if diversity was a factor in director selection then, in fact, the company would be deemed to have a policy, thus requiring disclosure. If this sounds unclear, it was–and is.  As a result, most companies have provided what I’ll call lame disclosures on diversity, and their behavior vis-à-vis diversity seems to have been unaffected by the disclosure requirement.

That could be about to change. In a speech delivered in June 2016, SEC Chair Mary Jo White acknowledged a poorly kept secret–that the current disclosure rules aren’t what they might be–and announced that “the [SEC] staff is preparing a recommendation…to require companies to include in their proxy statements more meaningful board diversity disclosures on their board members and nominees where that information is voluntarily self-reported by directors.”

Clarifying board diversity disclosure requirements may be welcome, though Chair White’s reference to self-reporting directors suggests that the resulting disclosures may not be as robust as some would like; for example, if a director with Hispanic ancestry does not regard himself or herself as Hispanic, a company could not claim him/her as such. (That said, I’m glad that Chair White used the term, as I’ve dealt with precisely this situation.)

It remains to be seen whether new rules are proposed before the presidential election (after which the composition of the SEC and its staff is likely to change), what they will seek in the way of disclosure, whether and in what form they will be adopted, and the extent to which limiting disclosure to self-reporting minority directors may impact the disclosure. However, it is reasonable to anticipate that they will have an impact on corporate behavior as well as on disclosure.

Where Does That Leave Us?

The level and types of diversity on our boards of directors may not be where we’d like them to be, but some progress has been made. I’m hopeful that we’ll see more of it in the coming years.


The views presented on the Governance Center Blog are not the official views of The Conference Board or the Governance Center and are not necessarily endorsed by all members, sponsors, advisors, contributors, staff members, or others associated with The Conference Board or the Governance Center.

About the author:

Robert B. Lamm is a Senior Fellow of the Governance Center at The Conference Board Governance Center and is Of Counsel to Gunster, Yoakley & Stewart, P.A., Fort Lauderdale, Florida, where he serves as co-chair of the firm’s Securities and Corporate Governance practice.   In addition to his role at Gunster, Bob is an Advisory Director of Argyle, which advises corporations on the effective communication of corporate governance, and he serves as an Independent Senior Advisor to the Deloitte Center for Corporate Governance. From 2008 to 2013, Bob was Assistant General Counsel and Assistant Secretary of Pfizer Inc.   Bob is an active, long-term member of the Society for Corporate Governance.  He was chair of the Society’s Securities Law Committee from 2011 to 2014 and has served on the Society’s Corporate Practices, Finance and National Conference Committees, as a member of its board of directors, and as chair of its 2004 National Conference Committee; and he is a recipient of the Society’s Bracebridge H. Young Distinguished Service Award.


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