Top 50 companies show that with effort, managerial emphasis and accountability, there is plenty of gain to be had.
By Shane Nelson
On February 5, The New York Times published an article on diversity trends on boards at Fortune 500 companies. The article was in response to a multi-year study that found there have been very little gains for the Fortune 500 with regard to Black, Latino, Asian and women representation on boards.
In 2012, women made up 16.6 percent of Fortune 500 boards, and minorities made up 13.3 percent (7.4 percent Black, 3.3 percent Latino and 2.6 percent Asian). As of 2016, just over a fifth (20.2 percent) of the Fortune 500’s boards are women. In terms of racial breakdown, board members are 7.9 percent Black, 3.5 percent Latino and 3.1 percent Asian.
Overall women representation on Fortune 500 boards increased by 3.6 percentage points in four years, and minority representation increased by just 1.1 percentage points.
This is uncompetitive. Companies need to do more to reflect the fast-changing demographics. Diversifying their boards is a critical step in leading the charge. But can it be done? One group of companies, the DiversityInc Top 50, has been working to keep pace with the country’s changing demographics for years.
The 2016 DiversityInc Top 50 outperformed the 2016 Fortune 500 in women and minority representation on boards. Twenty-six percent of the Top 50’s boards are women, 8.8 percent are Black, 6.5 percent are Latino and 4.8 percent are Asian. The Top 50 has close to 6 percentage points, or 29 percent, more women on its boards than the Fortune 500. The gap in minority representation is wider: the Top 50 has 5.6 percentage points, or 39 percent, more minorities on its boards.
One benefit that DiversityInc Top 50 companies see in more diverse board representation is having a more diverse senior management team. The data shows that, on average, Top 50 companies have higher representation of women and minorities on boards than the remainder of companies submitting data in our survey, resulting in higher representation in the top level.
The more diverse the board, the more likely the company is to include commitment to diversity and inclusion as a core component when appointing a CEO. The data also show that the more diverse the top level is, the more likely the company is to have a very strong commitment to diversity and inclusion, as determined by the following key factors:
• Accountability: 36 percent more of the Top 50 have their CEOs chairing the executive diversity council, which is responsible for setting the company’s D&I strategy and holding people accountable.
• Talent Development: 83 percent more of the Top 50 have sponsorship and mentoring programs, and 81 percent of the top level executives actively participate in the programs.
• Visibility: 68 percent more of the Top 50 have their CEOs meeting with company employee resource groups at least quarterly.
The DiversityInc Top 50 companies show that with effort, managerial emphasis and accountability, there is plenty of gain to be had.