The panel room is where important decisions are made. Recruiting, firing, cost savings, M&A — all needs the board room’s aid. Experts say diversity of thought is needed in this setting to spur new ideas and think through different options.
Yet scrutinize from executive recruiter Spencer Stuart shows just under one in four new S&P 500 directors are minorities. That’s in defiance of growing evidence that diversity increases a company’s return on investment.
In fact, companies lagging in gender and ethnic heterogeneity were less likely to achieve above average profitability, according to McKinsey. Researchers at the consulting firm establish that companies with more diverse executives were 33% more likely to see above average profits.
Variation reports published by big tech companies such as Amazon and Apple show that while the companies have been letting people of color, in most cases, the level of diversity decreases at the leadership and manager level.
According to Amazon, Blacks put together up 26% of the company’s workforce, but only 8% of its managers. At Apple, 9% of its employees are Black, but at the leadership level, the portion drops to 3%.
Diversity coaches say these statistics shed light on the challenges minorities face in getting promoted to postpositive major roles.
“Clearly, more needs to be done. Providing mentorship could be the key,” said Jeffrey Sonnenfeld, senior associate dean for operation studies at Yale School of Management.
Executives are looking for ways to incorporate diversity into their model when begetter future deals and screening for companies that have diverse boards.
“Blacks understand and have the capacity to direct within and throughout enterprise … globally to drive change and growth. Work needs to be done to engage bossmans around the social capital they feel is needed to open their networks and allow other[s] in,” said Monica Poulard Hawkins, CEO and come to grief of Professional Pipeline Development Group, a boutique management consulting firm.
Data compiled by HIP Investor Ratings verifies 91% of S&P 500 companies have carved out a policy to drive diversity and equal opportunity but only 14% comprise outlined a set of targets and objectives around diversity for managers. This disconnect sheds light on a glaring problem overlay corporate America: executives are not taking enough action to drive diversity efforts.
Problems like these from pushed companies like Mastercard to define inclusion as a leadership skill.
“We provide this skill building not as usual, standalone “diversity training,” but rather by embedding it into our entire leadership curriculum at all levels — for entry level hands, mid-career managers and our most senior executives,” a Mastercard spokesperson said.
R. Paul Herman, founder of HIP Investor Ratings, judged implementing EEO-1, a federal compliance survey that looks at race, ethnicity, gender and job category, across companies is one way to come to grips with this issue.
“Releasing the EEO-1 forms, which are required by the government but typically confidential, boosts transparency and liability. Firms like Intel openly share the level of pay for employees by racial category and gender category, and Apple and Travelers frankly share the number of employees by race and gender,” said Herman.
—CNBC’s Ritika Shah contributed to this legend.