Board’s Oversight of Racial DE&I
Jack "Rusty" O'Kelley III, Benjamin Colton, Holly Fetter
The Harvard Law School Forum on Corporate Governance article, "Board’s Oversight of Racial DE&I," was co-written by Russell Reynolds Associates Consultant Rusty O'Kelley, based on our joint study with State Street Global Advisors and the Ford Foundation, "The Board's Oversight of Racial and Ethnic Diversity, Equity and Inclusion." The article is excerpted below.
- What motivates board oversight of racial equity: The following risks and opportunities motivated directors’ increased focus on racial and ethnic diversity, equity, & inclusion (DE&I): reputation, strategy, financing, regulatory and compliance, and human capital. Directors did not cite the potential economic impact of racial inequity as a key motivator.
- Oversight in practice: Directors referenced one or more of the three major committees—audit, compensation, and nominations and governance—as having explicit oversight of racial and ethnic DE&I. Most boards undertake a hybrid approach to oversight—discussing the issue in committee, but also making it a full-board topic. The full-board discussions often center on the interplay between DE&I and strategy and on DE&I as a component of corporate culture.
- Where boards are focusing their attention: Directors indicated a heightened focus on racial and ethnic diversity as it relates to workforce diversity and representation; inclusion and belonging; retention, promotion and succession planning; and engagement on social and political issues. Few directors spoke about oversight of the potential impacts of their company’s products, services or operations on communities of color.
- Metrics and performance management: Directors—especially those who sit on the compensation committee—seek to identify the proper metrics to measure progress on DE&I and then to link executive compensation to performance against those goals. Directors also described the challenge of getting good data and interpreting it correctly.
- Challenges in a global context: Multinational corporations face a particular challenge when it comes to overseeing racial and ethnic diversity. Different regions and countries define and collect data on diversity in different ways. It is important to obtain the right data and to interpret it correctly.
Guidance: Our conversations with directors led to the development of “10 Responsibilities of Boards in the Effective Board Oversight of Racial and Ethnic Diversity,” a roadmap for boards that wish to elevate their focus on DE&I. We fully recognize that boards need to incorporate this guidance into their oversight practices in a way that is tailored to their particular company’s context:
- Ensure the CEO and board chair have the capacity and commitment to drive the organization’s racial equity efforts long-term
- Build a board whose directors are racially and ethnically diverse and have experience with oversight of DE&I
- Make racial equity an active part of the business strategy and work toward clear and quantitative key performance indicators
- Make racial and ethnic diversity, equity, and inclusion both a committee and full-board responsibility
- Regularly evaluate the potential impacts of the company’s operations on communities of color, embracing relevant opportunities and mitigating relevant risks
- Facilitate boardroom discussions that are thoughtful, balanced, and intentional, and build a culture where directors are empowered to challenge ideas
- Include the perspectives of stakeholders (including employees) in board discussions
- Create a structured onboarding and ongoing training process that prepares all directors for effective oversight of DE&I
- Build a coalition, share best practices, and learn from peers and experts
- Realize this is a long journey—be patient and don’t give up
To read the full article, click here.