A father and his teenage daughter once had a heated debate, said James Turley, director of Emerson Electric Co. and Citigroup Inc., at a recent Washington University School of Law conference on diversity.
“Finally, the girl said, ‘Dad, you don’t get it. Dad, you’re too pale, too male and too stale,’” said Turley, also the retired chairman and CEO of Ernst & Young. “The sad truth is, when you look at U.S. corporate boards, that’s what they’re looking like.”
Turley was one of six panelists who spoke at the capstone session for the “Resetting Performance Expectations: The Role of Directors and General Counsel in Developing Diversity and Gender Equity” conference on April 8.
Turley said 70 to 75 percent of the employees and customers of all U.S. companies will not be white men. Yet, more than 80 percent of the board members and executives are white men.
“This is not sustainable,” Turley said. “It’s about competitiveness. Diverse perspectives in management and at the board room generate superior results. It’s something we need to confront more aggressively. It is not a supply issue. It’s a demand problem. Companies have to be more aggressive.”
Arnold Donald, CEO and president of Carnival Corp. and director of Bank of America and Crown Holdings, was also a panelist for the session. He recalled being at a directors’ conference a couple of years ago when the presenter brought up a question: “How much do you think in advance about diversity when looking at your next board candidate?”
Donald said, “Fewer than 20 percent said they thought about it at all.”
Then, Donald said, someone in the audience argued that their first priority is to make sure they have qualified, experienced board members.
“He got applauded for saying that,” Donald said. “The reality is, nobody said diverse but not qualified. Of course, the person has to be qualified, but it just goes to show you the mindset.”
Donald said that diversity has to be “proactively engineered.” It won’t naturally happen on its own.
“It’s natural in nature, but it’s not natural in corporations,” Donald said. “People tend to identify people that they hang out with. Diversity has to be mindful and intentional.”
Diversity on boards is also good for financial returns, said Hillary Sale, professor of law at Washington University and event moderator. One study showed that companies that have three or more women on the board had higher returns in sales, equity and capital.
The number of women of color on corporate boards has stayed the same – 3.2 percent – since 2003, while the number of women overall on boards has risen from 13.6 percent in 2003 to almost 17 percent in 2013.
Donald gave some tips on how to become a board member.
“It’s easier to get on a board if you’re already on one,” he said.
Companies look at experience and track records, so for the first-timer, it’s not so easy, he said. But that’s where networking comes in.
“The reality is, there are rules – and there’s the way things get done,” he said.
The rules are: there’s a nominating committee, and the nominating committee processes the names. And then there’s a CEO who is looking for someone who is going to challenge him or her and also support the CEO’s corporate strategy, Donald said. There could also be particularly influential shareholders on the committee, depending on the size of the corporation.
“All of those players can come into the mix,” Donald said. “It’s not so much who you know, but who knows you.”
Mary Ann Hynes, director at GHD Group Pty Ltd. and senior counsel of Dentons, said people have to be tireless when looking for a board position.
“You have to be able to define yourself very quickly about what you can add,” she said. “Are you international? Are you strategic?”
Donald also serves as chair of the Executive Leadership Council, an organization that works to increase ethnic diversity on the executive level.
He said for the last 10 years, the number of African-American board members of Fortune 500 companies has declined.
“This is really simple stuff,” he said. “If you are involved in a business, the key to success is innovation. To innovate, you have to think outside the box. You want diversity because if you have a diverse team organized around a common objective, they will out-solution any homogeneous team. Diversity is a really good thing.”
