A Modern Approach to Recruiting Diverse Board Candidates
The Directors & Boards article, "A Modern Approach to Recruiting Diverse Board Candidates," was written by Russell Reynolds Associates Consultant Rusty O'Kelley, outlining how organizations can begin to diversify their boards. The article is excerpted below.
The emphasis on diversity, equity and inclusion (DEI) in the boardroom is shaping up to be a permanent reframing of all that boards do and, more broadly, how companies approach corporate governance writ large. Though this emphasis has been steadily increasing over the past several years, the events of 2020 have accelerated ongoing discussions and efforts, and public boards should expect increased pressure from stakeholders — if not explicit action taken against them — if real progress is not achieved.
Part of that pressure will come in the form of legislation and regulation. In the fall of 2020, California was the first state to enact legislation requiring public companies headquartered in the state to have at least one board member from an underrepresented community by the end of 2021. Nasdaq’s newly proposed listing requirement has a similar mandate and is expected to be approved by the SEC. These regulations will likely use census definitions of diversity when assessing compliance, as California has.
While these mandates may be unpopular with some commentators, the push for greater diversity is largely well received by stakeholder groups, and particularly by employees. One reason is that the workforce is increasingly diverse, and these initiatives respond to their call for better representation.
The public is also weighing in. The COVID-19 pandemic and social justice protests in the wake of George Floyd’s death made clear to everyone the challenges Black and other ethnically diverse communities face daily and triggered a public discussion on the topic unlike anything we have seen before. Confronted with the lack of diversity in leadership roles, corporate America acted. Between the third quarter of 2020 and the end of the second quarter of 2021, more than 110 Black directors joined 114 of the S&P 500 company boards. It is a good start, yet more than 100 S&P 500 companies still lack a Black director, and in some cases have no ethnically diverse directors at all.
There is clearly a business benefit to taking action. But where do boards start?
To increase the diversity of their boards, companies must change how they recruit diverse talent. Too many boards think they can complete a search for a diverse director in under three months, failing to recognize how in-demand diverse executives are and how complex a well-designed process can be to do well. Boards should instead develop a three- to five-year succession plan, so they have a long-term view of the strategy-driven skills and experiences new directors need. Along with knowledge, skills and experiences, ethnic diversity needs to be considered as part of the overall composition of the board and prioritized appropriately.
Boards then need to identify pools of diverse talent, which will likely be different from where and how the board has recruited in the past. Part of this should include building relationships with diverse executives before they become attractive director candidates, creating a pipeline to board service and a network of up-and-coming diverse leaders.
To read the full article, click here.