Representation Isn’t Enough: Study of Fortune 500 Black, Latino, and Latino Board Members Shows Companies Still Struggle to Achieve DE&I Goals, Despite Greater Board Diversity | Illinois
CHICAGO–(BUSINESS WIRE)–February 28, 2022–
Data recently hailed by the ISS shows that non-white directors now hold about 50% more board seats of companies in the Russell 3000 stock index than in 2019.1 Corporate America has made demonstrable progress in diverse representation on the board of directors. Yet new research released for Black History Month shows that the world’s largest companies still have room to grow by effectively operationalizing diversity, equity and inclusion (DE&I) goals and by achieving measurable results.
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A new Ariel study of Black, Latino and Latina Fortune 500 board members shows that companies are struggling to operationalize diversity, equity and inclusion goals, despite greater diversity across the board. board of directors. (Photo: Ariel Investments)
Ariel Investments, LLC, a global asset management firm (“Ariel”) co-founded the Black Corporate Directors Conference (“the Conference”) in 2002 with Russell Reynolds. Twenty years later, the annual event brings together Black, Latino and Latino directors of the Fortune 500 to share best practices and pledge to promote the civil rights agenda within their respective boards.
In September 2021, Ariel commissioned a study of 151 Fortune 500 Black, Latino, and Latino corporate directors who attended the conference virtually. Responses were sent by Ariel’s data partner, Momentive (formerly SurveyMonkey). Ariel and Momentive also surveyed a nationwide sample of 4,958 American workers of all races for direct comparison with the group of corporate managers.
While 90% of directors surveyed say their boards are more racially diverse than five years ago, several barriers are holding back progress at all levels of companies.
- DE&I is a new agenda item for many boards, added in the last 18 months following the murder of George Floyd. In a few cases, it is still not at the top of the list.
- 40% of respondents say their board has recently added DE&I to the main agenda in the past 18 months, while 7% still have not added it to the agenda.
- The good news: when DE&I East main agenda item, resources are allocated to support these objectives. For companies where DE&I is a priority, 82% of directors say their company is investing capital to support these initiatives, and 71% believe there is enough capital committed.
- Many respondents believe that board oversight of DE&I matters is inadequate. Moreover, diverse directors are not well placed to drive change.
- Nearly half (41%) of diversity directors say their board does not regularly monitor risks related to potential impacts on communities of color.
- There is also evidence that business leaders need better training to implement the programs. Nearly half (45%) of respondents say their boards are not preparing organizational leaders for effective oversight of DE&I.
- There remains an opportunity to better position diverse administrators to drive change. Less than half of respondents (45%) say that various directors on their board oversee DE&I through nominating and governance committees or other relevant committees.
- There is an education gap between the board and average employees about how DE&I contributes to business results.
- The most diverse directors believe that companies act on DE&I issues out of concern for the experience of diverse employees (66%), out of concern for social inequality (59%) and in the interest of shareholders (59%) – suggesting that directors believe DE&I is critical to a company’s success.
- However, employees do not believe that companies prioritize DE&I for business or social reasons. 62% of American workers believe that companies act for public relations reasons or political concerns.
- This mismatch could be attributed to a lack of information sharing and a disconnect between employees and leaders: 37% of directors believe that their company’s leadership teams are disconnected from the real experiences of their diverse employees.
- Without an adequate understanding of the purpose of DE&I initiatives, American workers say management teams pay too much attention to race.
- Miscellaneous administrators (62%) feel that the breed receives too small the attention of the company’s management teams.
- However, American workers disagree. More than half of white men (54%) and nearly half of white women (40%) say their leadership team pays too much pay attention to the race.
- Surprisingly, a significant portion of black (35% of men, 32% of women) and Hispanic (42% of men, 28% of women) workers feel the same way.
Calls to Action for American Companies
Ariel Investments remains committed to the following calls to action for boards and management, titled: The Three Ps: People, Procurement and Philanthropy. In light of the inaugural study of Black corporate directors, Ariel Investments recommends additional tactics for directors and management teams to meaningfully advance their DE&I goals at all levels of their business:
- What gets measured gets done: When developing DE&I goals, make sure commitments are measurable by including key dates, deadlines, and targets.
- Create Accountability: Don’t just inspire management teams to succeed, but also hold them financially accountable for lack of progress.
- Capital counts: When goals are set, ensure that specific budget lines are allocated to achieve them, with specific dates and deadlines, and reassess each year.
- Transparency translates: Update all stakeholders regularly (eg, quarterly) on DE&I progress and be honest about challenges.
- Offer data: Educate all employees – from the grassroots to the top – using data on why diversity is good for business results. Connect business goals to DE&I goals using evidence on the revenue benefits of diversity. For example, a 2018 McKinsey study found that companies with the most ethnically and culturally diverse boards were 43% more likely to earn higher profits.
- Representation in the right places: Ensure that when diverse directors join boards, they are well positioned to advance DE&I goals by serving on nominating and governance committees, in addition to other committees. Also recruit managers from all races who enjoy and have a proven track record in tackling DE&I issues.
- Keep DE&I on the agenda, indefinitely: Foster a board culture that empowers directors to speak out by regularly including the company’s racial justice agenda in board meetings and actively soliciting input from diverse directors.
Click here to read the full results of the 2021 Black Corporate Directors Study.
About the Black Corporate Directors Conference
In 2002, Ariel Investments co-founded the Black Corporate Directors Conference with Russell Reynolds to develop best practices, foster corporate diversity and inclusion, and encourage directors to promote the civil rights agenda within their respective boards. . As a result of our participants’ activism, we are seeing fuller dialogues surrounding the need for diversity and inclusion within the corporate sector. The 2021 conference, held virtually, brought together more than 150 Black, Latino, and Latino directors and members of their corporate leadership teams. The event is made possible through a partnership between Ariel Investments, Russell Reynolds and Deloitte.
About Ariel Investments
Ariel Investments, LLC is a global value-based asset management firm founded in 1983. Ariel is headquartered in Chicago with offices in New York, San Francisco and Sydney. As of December 31, 2021, Ariel’s company-wide assets under management totaled approximately $18.3 billion, including $873.7 million in assets from Ariel Alternatives, a subsidiary of Ariel Investments. . Ariel serves individual and institutional investors through five no-fee mutual funds and nine segregated account strategies. For more information, please visit Ariel’s website at arielinvestments.com.
1 “Board diversity has increased in 2021. Some wonder what took so long.” The New York Times (nytimes.com)
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PUBLISHED: 02/28/2022 09:13 AM/DISC: 02/28/2022 09:13 AM
Copyright BusinessWire 2022.