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How to create a diverse board of directors and empower it to thrive

September 4, 2019
Diversity & Inclusion

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Board diversity—or rather the lack thereof—has never been under more scrutiny.

In recent years, money managers like BlackRock and State Street have called for more diversity across corporate boardrooms, with the latter going so far as to announce it would begin voting against companies without any women directors. Legislation to encourage, or even mandate, diversity on boards is also gaining traction. In 2018, California passed a bill that requires every publicly held corporation in the state to have at least one woman serving on its board of directors, and New Jersey has similar bills under consideration. In June 2019, Illinois lawmakers passed legislation requiring publicly traded corporations in the state to report the racial and ethnic makeup of their boards. That information will be used to create a rating system assessing the representation of women and minorities on corporate boards.

It may ultimately take threats and mandates to push many organizations to diversify their boards. But according to Angelique Power and Sophia Shaw, the decision to diversify should be simple. Angelique Power is president of the Field Foundation, which funds programs focused on community empowerment, and sits on the board of directors at Grantmakers in the Arts, Forefront Illinois, and 6018North. Sophia Shaw is an adjunct professor of social impact at the Kellogg School, director of the Kellogg Board Fellows program, and a current board member of the Art Institute of Chicago and the National Museum of Natural History.

“Board members are sort of like gardeners in that they’re trying to cultivate an organization so that it thrives,” Power says. The more diverse the set of gardeners, in her view, the more resilient the organization.

Moreover, the pair argue, corporations and nonprofits should make an effort to increase board diversity because it’s the right thing to do. For instance, Kellogg’s David Matsa, along with Amalia Miller from the University of Virginia, have found that having women on a corporate board increases the chances of women gaining top executive positions, including CEO—critical, given that the number of female CEOs in the Fortune 500 has hovered around 6 percent for years.

But diversifying boards does not come easily or naturally to many organizations. So Shaw and Power offer advice for leaders committed to developing and sustaining a more inclusive board.

Reassess Your Board’s Goals and Your Selection Criteria
The key to creating a diverse board begins with reexamining the systems and functions of a board. Organizations have typically considered an individual’s professional achievements when assessing potential board members, and achieving high status on the career ladder has traditionally made someone a good candidate.

Additionally, in the nonprofit world there is a dependence on high-net-worth individuals to serve as board members, according to Power. “Often in those nonprofit structures, board members tend to give unrestricted dollars that allow the organization to have some breathing room,” she says. “So, by default, what’s become a main criteria for joining a board is how much you can give financially.”

But focusing on an individual’s giving power or how high on the corporate ladder they may have reached glazes over the fact that women and people of color have historically faced barriers that white men have not. Similarly, certain communities have been systematically excluded from accumulating generational wealth. Continuing to focus on these traditional selection criteria, the pair argue, will not increase board diversity for your nonprofit organization.

“You’ve cut the swath so small that of course you’re going to always get the same type of board member,” Power says.

Organizations need to reassess their goals for the board, including how to consider expertise and other factors unique to the organization, when creating selection criteria. In order to boost diversity in nonprofit board membership, those criteria need to be amended to be more expansive. For example, experience on similar boards is often the first criterion organizations consider, when having the lived experience necessary to contribute deeply to the organization may be a lot more valuable.

“While some individuals may be able to devote their financial resources or corporate connections,” Shaw says, “others may offer valuable technical counsel and expertise around functions such as accounting, human resources, enterprise risk management, master site planning, financing, or construction.” Others may be better able to represent the voices and experiences of the individuals or communities the organization serves.

How to Make Space for New Board Candidates
To recruit new board members, leaders should seek opinions and recommendations from a wide range of stakeholders. For a nonprofit, that includes not just donors but an organization’s staff, partners, and community. For a publicly traded company, the list may include industry experts, as well as specialists in technology, cybersecurity, and those experienced in working with activist investors.

“Reach out to a network beyond who is currently sitting on your board,” Power says. “You will get a totally different group of potential candidates than your board nominating committee is coming up with.”

At the same time, it’s also important to understand the internal politics of your organization’s board. There may be internal alliances or feuds, as well as varying degrees of comfort about expanding the makeup of the board itself.

“Think of the current board as a Thanksgiving table,” Shaw says. “Many delicate topics are being avoided to keep the peace. When somebody invites a new member to the table, whose traditions or assumptions may be different from the status quo, this can bring to light underlying biases or differences in opinion that have lain under the surface.”

Working with a facilitator to discuss race and institutional bias helps, as does engaging in thoughtful succession planning, because when a board is not diverse to begin with, taking steps to increase diversity naturally means that some people will have to step down, or the board will have to expand. There needs to be a clear reason beyond tokenism to expand the board. The more clearly bringing in new voices—in terms of race, economics, gender, ability, and LGBTQIA identity—can be tied to the organization’s mission, the easier it will be for other board members to create the necessary room.

“People may not want to go off boards because at some point in their lives board membership may be the only thing that makes them feel like they’re still an integral member of the organization or of society,” Shaw says. “It’s hard for some board members to move along or to see new people take their place. These issues relate to our own sense of ego and fragility and mortality.” More than one board member has expressed this feeling to Shaw as being “put out to pasture.”

But there may be some creative workarounds. Power describes how the Field Foundation’s bylaws have been written to stipulate that members can become lifetime directors at age 75, as a way to make room for new board members. “Recently, three board members voluntarily became life directors, and we brought on three new board members who are absolute visionaries in areas we fund—allowing the board to retain new expertise while keeping institutional wisdom,” Power says.

Create an Environment for the Board to Thrive
As important as recruiting new board members to an organization is, creating an environment for them to contribute meaningfully is equally critical to the board’s effectiveness.

The best way the organization can facilitate such an environment is by making sure that board members are clear on their responsibilities when it comes to inclusion.

For example, when it comes to equity issues from resolving pay disparities to ensuring a safe workplace environment, a board should not rely on people of color and women to do all the work. Inclusion should be something everyone on the board gets behind, particularly those who have the power and the privilege to push for greater equity. It’s also important not to rely on a single person to speak for or to represent an entire group.

Beyond issues of equity, a new board member—particularly someone from a group that has been historically underrepresented on the board—can naturally glean new insights that others may not be attuned to notice.

For example, an organization might be using language that is patronizing or tone deaf to the communities the organization aims to help. Or they may be attuned to hidden barriers baked into existing policies and practices that prevent the organization from succeeding with its goals.

“It’s a little bit like when you first move into a new house or apartment,” Shaw says. “Sometime during that first day, you should write down all the things you really want to fix—like the green wallpaper or the old this or that—because after a year or so, you may stop seeing them.”

The same holds true for a new member of a board, who has real power to energize change simply by virtue of a fresh pair of eyes.

“Even knowing who to connect to within communities that have historically been overlooked is very valuable,” Power says. “So many goals of organizations are not achieved because the boards are often based on the belief that access to capital makes you smarter, which is fundamentally untrue.”

Conversely, long-standing members of the board, particularly those who represent majority groups, should think carefully about what it means to be an ally—a term that Power says is often misunderstood. Being an ally can certainly include speaking up for others, but it can also mean being silent, listening, or even stepping aside.

“Often, people in a marginalized group are the last people who want to actually make diversity, equity, and inclusion the top of their agenda,” Power says. “They would much rather second someone else who’s pushing that forward. This is what we mean by ‘allyship,’ someone with privilege helping to do the work, whether that’s leading from the front sometimes, or from the side and from the rear at other times.”

Ultimately, board members have a role that is both weighty and inspiring—regardless of their personal background. They are the spine of the organization, and their direction can change an entire company or nonprofit for the better. Any successful effort to strengthen a board will be based in an authentic pursuit of folks who can help the organization holistically from a range of viewpoints, skills, and lived experiences.

“If you want to reinvent tepid ‘diversity initiatives’ and gain a truly distinct and healthy board of visionaries, disrupt old notions of who should be in power,” Power says. “When you unlock it beyond solely those with wealth, you get a range of new options that will jumpstart equity, diversity, inclusion, and likely an incredible board experience for everyone involved.”

By Sophia Shaw and Jenny Fisher

Source: Kellogg School of Management

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