By Scott Chase
The competition for talent may drive diversity in the workforce and the boardroom.
That was the assertion by Deborah DeHaas, vice chairman and national managing partner for the Center for Board Effectiveness at Deloitte, who spoke in May at the Private Company Governance Summit (PCGS), an event that was was founded six years ago by the editors and staff of Directors & Boards to transfer the core governance principles and best practices of public companies to the private company arena.
DeHass kicked off PCGS 2018, held in Washington, D.C., with opening remarks that framed up an evolving dynamic of diversity. Among the top issues on the agenda for public company boards, DeHaas said, quoting from the 2017-2018 NACD Public Company Governance Survey, is competition for talent.
The future of work, and the rise of younger generations, signals a sea change in the composition of executive and board leadership, DeHaas explained. How does the future of work change organization design and behavior? How does it change leadership, talent, career and learning? How long will it take a rising cadre of executives to dismantle the once self-perpetuating structures of “good old boys clubs,” more recently termed “traditional non-diverse networks.”
Probably not too much longer, it seems. The issue of diversity continues to garner attention as it evolves into a measurable component of board structure that can yield thumbs up or thumbs down related to a board’s progressiveness.
In his annual midyear guidance to directors titled “Spotlight on Boards,” governance super-lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz counsels directors to “evaluate the board’s and committees’ performance on a regular basis and consider the optimal board and committee composition and structure, including board refreshment, expertise and skill sets, independence and diversity, as well as the best way to communicate with investors regarding these issues.”
The need to have a defined and transparent means of establishing board composition that is blind to color and gender is key, as well as a mechanism for letting key stakeholders know what is being done in pursuit of fairness and inclusion. Another recent development designed to challenge continued barriers to board diversity is the establishment last month by Women Corporate Directors of a Nominating & Governance Chair Round table, comprising 18 male and female ethnically diverse board chairs, CEOs, and nominating and governance committee chairs. The N&G Roundtable is charged with addressing “persistent impediments to board diversity, even as investor groups have pushed for more women and other diverse directors around the boardroom table,” and is sponsored by KPMG.
“For many companies, the wake-up call has been from shareholders, investors, and fund managers who have put this issue squarely in their proxy voting guidelines,” says Kapila Anand, lead director of WCD, director at Extended Stay America and ESH Hospitality, and N&G Round table leader. “For others, it has been a journey to refresh board composition in light of the changing business environment.” (Anand was a featured Directors & Boards Director to Watch in its 2017 roster.)
“With regard to gender diversity in particular,” adds WCD CEO Susan C. Keating, “one of the obstacles to getting more women on boards has been a lack of agreement on why the numbers continue to stay so low.”
In a survey of more than 4,000 directors that WCD conducted with Spencer Stuart and researchers from Harvard Business School, male directors cited a “lack of qualified female candidates” as the reason for low diversity, while female directors assigned cause to entrenched “traditional non-diverse networks.”
Both men and women agreed, however, that a key factor also was the board’s low priority to recruit diverse candidates.“ The N&G Round table will develop actionable recommendations to help reverse this course,” says 2015 Director to Watch Gabrielle Sulzberger, General Partner, Fontis Partners, and a director at Brixmor Property Group and Teva Pharmaceuticals. To launch the effort, the group developed a five-point action plan, including nominating and governance peer group exchanges focused on board diversity, evaluating a centralized database of diverse directors and board candidates, devising a strategy to engage investor groups and alliance organizations, development of a library/resource for nominating & governance committees, and establishing best-in-class individual board member performance assessments.
“We encourage all board nominating and governance committee members to participate and join the dialogue about how to accelerate board refreshment, as a channel to both greater diversity and better governance,” Anand says. “Directors need more tools and resources to do so, and our N&G round table action plan has already and will in the future lay out some lessons learned for the board.”
For advocates of greater diversity in the boardroom, these lessons can’t be learned fast enough.
Betsy Atkins (NACD)Director, Wynn Resorts, Ltd., Cognizant, Schneider Electric, SL Green
Betsy Atkins is the former CEO of Clear Standards, Inc., a provider of energy analytics management and “sustainability”software. She has served on some of the world’s most visible global public company boards and has worked behind the scenes at companies like Chico’s, Vonage, Darden Restaurants, NASDAQ, HealthSouth, Wix and Reynolds American. Atkins started her business career as an entrepreneur co-founding several successful digital tech and consumer companies including blockbuster $5.4 billion Ascend Communications.
Atkins is an effective operational leader, having been CEO three times, dramatically scaling, building and repositioning businesses. She has a strong operational perspective with focus on taking friction out of the consumer experience. Atkins is serving on four public company boards: Wynn Resorts, Ltd., Cognizant, Schneider Electric and SL Green. She also is a board member of Volvo Car Corporation, a private company.
Be generous with your time: My philosophy on corporate governance focuses on being highly engaged and the belief that directors must be a competitive accelerant to the business, positively impacting the company in a measurable way. Directors need to leverage their professional Rolodexes to facilitate meaningful introductions for management for new business opportunities, strategic partnerships and professional development. Be generous with your time to help mentor and maximize the potential of the senior leadership team where you are a director.