THE POWER OF INCLUSION
INCREASING DIVERSITY AMONG CORPORATE BOARDS OF DIRECTORS THROUGH
DESIGNED PROFESSIONAL NETWORKING, MENTORING AND SUCCESSION PLANNING

The persistence of the “gender gap” and, more broadly, the “diversity gap,” among corporate boards of directors throughout the United States and worldwide is well-documented. The diversity gap exists, notwithstanding substantial efforts on the part of corporate, legal and government leaders together with substantial private and public investment in professional development and educational programs aimed at promoting diversity and inclusion. Corporate leaders, in collaboration with government leaders, must facilitate a deliberate re-design of the way corporate leaders build their professional and personal networks. Corporate boards of directors and senior management teams must build inclusive networks in order to eliminate the diversity gap. There are many initiatives that have been made and continue to be made now, but building inclusive professional and personal networks is the best shot we have at making permanent change.

Closing the Diversity Gap:  Existing Initiatives

The Public Sector: A Spotlight on California and New, Groundbreaking Legislation

Governor Jerry Brown of California, throughout his career in government service, has been a champion of inclusiveness. So, it is not surprising that Governor Brown made history, on September 30, 2018, when he signed a bill into law that makes California the first state to require corporate boards of public companies to include women. The legislation requires California corporations or out-of-state corporations that are publicly held and whose principal executive offices are located in California to have at least 1 woman sitting on their boards of directors by the close of the calendar year 2019 and 2 women (for boards with 5 directors) or 3 women (for boards with 6 or more directors) by the close of the calendar year 2021. If corporations fail to comply with the requirement, they will be subject to a material fine (e.g., $100,000 for the initial violation of the law and $300,000 for a subsequent violation).

In fact, the California State Legislature “found and declared” the following in support of the legislation:

“More women directors serving on boards of directors of publicly held corporations will boost the California economy, improve opportunities for women in the workplace, and protect California taxpayers, shareholders, and retirees, including retired California state employees and teachers whose pensions are managed by CalPERS and CalSTRS. Yet studies predict that it will take 40 or 50 years to achieve gender parity, if something is not done proactively.”

The legislation has both advocates and opponents – both equally vocal. Consider for example the OpEd from Bryce Covert of the New York Times. Covert is laudatory of the legislation:

“California took a step that actually has the potential to make companies get on board with [the benefits of having diverse boards]. Instead of stopping it before we can even see whether it works, critics should offer a better solution for changing the persistently pathetic numbers of women on boards or get out of the state’s way.”

SEC Commissioner Hester Peirce opposes the new legislation. Commissioner Peirce has said:

"The California legislation effectively forces corporations, including non-California corporations, to consider all women as stakeholders. … Opening such a wide door introduces uncertainty and political influence into corporate operations."

Jessica Levinson, a professor at Loyola Law School in Los Angeles, California, has characterized the new legislation as “blatant gender preference,” which may be unconstitutional. Professor Levinson, in explaining this characterization, notes that the legislation:

“specifically creates a classification based on gender, and therefore it raises questions of equal protection under both the U.S. Constitution and the California Constitution. When the government legislates on the basis of gender, courts typically subject that legislation to a heightened scrutiny. This basically means the government has to prove it has a really good reason for doing what it is doing, and that there isn't a better way of accomplishing that goal."

Whether the California legislation remains as intact or is proven to be unconstitutional remains to be seen, but the legislation has added fuel to the existing debate and opened a new thread of dialogue about how to address and close the diversity gap.

The Private Sector

Initiatives in the private sector for addressing the diversity gap have been in place for a long period of time. Catalyst Inc. (“Catalyst”), the Executive Leadership Council (“ELC”) and the Hispanic Association on Corporate Responsibility (“HACR”) are non-profit organizations that support and advance the interests of executive women and minorities in the workplace, including being champions for increased diversity and fair representation on corporate boards. Catalyst, ELC, and HACR formed a collaboration known as the Alliance for Board Diversity (the “Alliance”). Catalyst, ELC, HACR and the Alliance have all documented the diversity gap.

Many other stakeholders committed to achieving diversity at all levels of corporate leadership, including scholars, advocacy groups and governance consultancies, have documented the diversity gap. See, for example: Glass, Lewis & Co., The 30% Club, Paradigm for Parity and Women Corporate Directors.

Institutional shareholders that have publicly supported board diversity include the following, among many others: California Public Employees' Retirement System, New York City Pension Funds, State Street Global Advisors and The Vanguard Group, Inc.

Moreover, there is evidence that diverse boards out-perform non-diverse boards with respect to a number of metrics. For example:

“Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result, a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth.”

Laurence D. Fink, Chairman and CEO of BlackRock, Inc. (https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter; https://www.blackrock.com/corporate/literature/publication/blk-commentary-engaging-on-diversity-march2018.pdf )

With so many stakeholders vociferously in support of corporate board diversity, why is attaining diversity on corporate boards seem to be so difficult?
Why does the “diversity gap” persist?

The Diversity Gap Persists Due to Homogeneous Networks Among Corporate Leaders

One need only look to the process through which the vacancies on corporate board seats have been, and continue to be, filled. The majority of vacancies are filled through the networks of existing board members, and by any measure, objective data illustrate that (1) the majority of existing board members are non-diverse, and (2) the networks of these non-diverse board members are themselves non-diverse.

“Boards are like any 'club.’ CEOs and directors want to ‘feel comfortable’ when considering board candidates and when vetting a potential board member; a candidate endorsement from someone in their community – a CEO – goes a long way. Women may have the qualifications, but boards want to know that another CEO has seen that person operate effectively in a boardroom setting. … I’ve heard stories where top-notch executive women did not get a board seat because nobody on that board knew someone who knew her.”

Janice Ellig, Chief Executive Officer at Ellig Group (http://chadickellig.com/wp-content/uploads/2017/04/Nasdaq-Talks-to-Janice-Ellig-Moving-the-Needle-on-Boardroom-Diversity-08-04-16.pdf

Since networks of, and networking by and with, existing board members are factors in determining the individuals who are identified as candidates for board vacancies, changing existing habits, patterns and tendencies in networking must play a role in achieving greater diversity in the composition of boards.

Networking occurs through a number of ways that can be generally placed into two principal categories: (a) face-to-face networking and (b) social media-based networking. The current face-to-face and social media networking practices of senior management teams and directors serve to keep networks relatively non-diverse or homogeneous. These homogenous networks, in turn, yield non-diverse pools of candidates for board vacancies and, therefore, contribute to the persistence of the “diversity gap” in corporate governance.

We Can and We Must Do More:  Curate Inclusive Networking

Corporate leaders must deliberately re-design – or curate – the networking activities of diverse- and non-diverse leaders throughout the pipeline in order to facilitate the organic growth of relationships. Incumbent leaders must facilitate interactions in which all current and potential leaders can discover the value that, together, they can generate with each other just by virtue of … who they are, their competencies, their passions, the skill sets they possess and what they like to do – not just by the demographic characteristics they possess.

And, it is not just corporate leaders who bear a responsibility to curate inclusive networking. We all can make efforts toward ensuring that our networks and the activities that support the building of our networks are inclusive. Not many activities are more rewarding than getting to know another person or a group of people and coming to understand how much you really have in common and the possibilities that, together, you can progress.

Inclusive Networking

Tip #1 that Jeff Dyer, Hal Gregersen and Clayton M. Christensen provide in their super-insightful book, The Innovator’s DNA, is to “Expand the diversity of your network.”

“List the top-ten people you would typically talk with if you were trying to get or refine a new idea. Go ahead. Make the list right now. How many of those people have a background or perspective that is likely to be very different from yours? For example, how many are teenagers, or how many are older than seventy-five? How many were born and grew up in a different country? How many are from a very different socioeconomic group than yours? If your current idea network either isn’t very large or isn’t very diverse, expand your idea pool by identifying and visiting with people who are the most different from you…”

Consider, for example, the initiative that Sir Richard Branson took in cultivating diversity among Virgin Music’s internal networks:

“Richard Branson created an idea networking process when founding Virgin Music. He bought an old castle and transformed it into a conversation hub for diverse people from the entertainment industry, including musicians, artists, producers, filmmakers, and otherwise. Branson understands that creating networking opportunities within Virgin produces conversations between people that just might trigger innovative ideas.”

All too often, networking events organized by affinity groups or organizations lack diversity; many such events include only women or only African Americans or only Hispanic Americans or only people of color, etc.

Networking events and opportunities should be curated in a manner that assures the inclusion of a wide variety of individuals across professional, demographic and other relevant characteristics.

We put together a high-level outline of the “The Inclusion Lab” below to explore how networking among diverse and non-diverse leaders, together, could be designed to promote the organic growth of relationships among all leaders and increased diversity within networks and among corporate boards. Please scroll down to see the outline of the Inclusion Lab, and we encourage boards of directors and senior management teams to adopt the Inclusion Lab.

THE INCLUSION LAB: A HIGH-LEVEL OUTLINE

A key to closing the diversity gap is to foster “inclusive activities” among professionals of different characteristics – among professionals who normally would not be in the same professional or personal network, now. It is time to deliberately construct interactions among us so that we become familiar with others previously unknown to us. And, since every new initiative or endeavor appears to have the word “lab” in its name, why not build or sponsor an Inclusion Lab?

The networking and mentoring program or “lab” (the “Inclusion Lab”) would involve one to three boards of directors of public companies in the Fortune 500 whereby the non-diverse directors who are serving on those boards and who are within 2 to 5 years of retiring from their service actively mentor 3 to 5 “board ready” or “near-board ready” diverse candidates (i.e., women, people of color and other individuals possessing characteristics historically underrepresented on corporate boards) who could become candidates to fill the retiring directors’ board vacancies upon retirement.

There are many programs and initiatives in Corporate America and in the global corporate landscape. What makes this Inclusion Lab unique is that what will underpin the Lab is deliberately designed networking opportunities specifically “formulated” or “curated” to foster relationships between incumbent directors and potential director candidates in order to enhance the “inclusiveness” (or diversity) of each incumbent director’s network and each non-diverse potential director candidate’s network.

Each individual who participates in the Inclusion Lab will be either a “Mentor Director” (incumbent director) or a “Mentee Director Candidate” (potential director candidate).

Mentor DirectorMentee Director Candidate Groups and Pairs. During the Inclusion Lab, Mentor Directors and Mentee Director Candidates will be part of a designed networking program with the objective of fostering an “organic relationship” among each Mentor Director and Mentee Director Candidate pair (or, among groups of pairs, depending on the design of the Inclusion Lab).

The potential organic relationships between Mentors and Mentees and how such relationships can grow and evolve will be determined based on the overlaps in the professional and personal interests of the Mentors and Mentees.

Then, each pair will work with a coach, who will facilitate one or two substantive projects between each Mentee-Mentor pair that is (are) intended to nourish the relationship and be value-added to each of the participants, regardless of whether a Mentee succeeds at becoming a member of a board of directors. Examples of projects could include:

  • If the Mentor Director has an interest in developing a TED Talk based on his or her subject matter expertise, then the Mentee Director Candidate can partner with the Mentor Director to help him or her with putting together the TED Talk.
  • If the Mentor Director has a wine blog or a blog based on another subject area, the Mentee Director Candidate could assist the Mentor Director will the blog.
  • The examples can be as varied as your imagination or the imaginations of the Mentors and Mentees.

The Full-Time Professional Coach. The coach would help each Mentor Directors and Mentee Director Candidate pair identify a meaningful engagement and/or a set of designed exercises that will yield value between each pair. From those engagements and/or exercises will come the experience of working together side-by-side, and as a result these “deeds” will become - will be planted as — the seeds of an organic relationship. These deeds and seeds will promote the growth of relationships and, as a result, networks.

Value Networking. Networking seems easy in that it is a “one-click away” on LinkedIn. However, the sheer volume of connections on LinkedIn and similar platforms requires that we look at networking in a different way, i.e., as “value networking.”

Value networking is based on such questions as:

  • How can I add value to you?
  • How can we create value together?

These questions arise from the fact that our strongest relationships come from living and practicing those relationships and from being in the trenches together – think college; think law school; think business school; think CPA exam; think medical boards, etc.

Adam Grant, in his amazing book, Give and Take, puts together a how-to on proactively and constructively building one’s network. In Grant’s words: “Give and Take highlights what effective networking, collaboration, influence, negotiation, and leadership skills have in common. [The book] opens up an approach to success that has the power to transform not just individuals and groups, but entire organizations and communities.” Using Grant’s insights and guidance, building inclusive and value-building networks will help us close the diversity gap on corporate boards and among leadership teams, more generally.

 

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