More than a dozen companies, including Zillow and M.M.LaFleur, are promising to add at least one Black director to their boards within the next year, as businesses across the United States slowly get their leadership to look more like the customers they serve.
The companies all made the pledge as part of the launch of an initiative by The Board Challenge, which is pushing to get more diversity into boardrooms. The Board Challenge’s cofounders will check in with each of them after six months and again at 12 months to monitor their progress, while also helping them to find candidates.
“America has been reminded again in tragic fashion that we must redouble our efforts to build a more inclusive society,” Brad Gerstner, CEO of Altimeter Capital and a cofounder of The Board Challenge, said in a statement. “Business leaders can’t let this moment pass us by without playing our part and taking this tangible step to build a more diverse boardroom.”
Companies have been making slow progress in getting people who are not white men into leadership positions. Across the big companies in the S&P 500 index, more than a third did not have a single Black director in 2019, according to Black Enterprise. The rate of 37 percent was down slightly from 39 percent a year before.
In many cases, forces outside the companies are pushing for better representation in the boardroom and in senior executive ranks. Shareholders, governments and other proponents say it makes business sense for companies’ leadership to reflect the customers they serve and the workforces they oversee. It can get a more diverse set of opinions and experiences into the decision-making process.
In recent years, shareholders and governments have been putting heavier pressure on companies to add women in particular to their boards. California, for example, requires companies that are headquartered in the state and whose stock is publicly held to have at least one woman on their board.
One reason is that investors and others say it is easier to track the numbers on gender diversity than on racial or ethnic diversity. But The Board Challenge is the latest example of the pressure moving toward better representation for racial minorities as well.
State Street Global Advisors, which is a major shareholder in more than 10,000 companies around the world through its funds, late last month sent a letter to companies asking them to offer details about the racial diversity in their boardrooms and workforces. State Street is the company that commissioned the “Fearless Girl” statue that faced down Wall Street’s famous “Charging Bull” statue.
Shareholders have been increasing pressure on businesses to improve their diversity, an effort that may have reached a tipping point this year, according to analysts at Morgan Stanley. They found that 20 percent of diversity-related proposals at annual shareholder meetings passed this year, as of early August. That’s up from zero just two years ago.
The 17 companies that pledged to add a Black director in the next 12 months are Accolade, Altimeter Growth, Amperity, Bolster, Gusto, Heritage-Crystal Clean, Heritage Environmental Services, HopSkipDrive, Kin, M.M.LaFleur, Nextdoor, PagerDuty, RealSelf, Ripple, Senreve, Vinyl Me, Please and Zillow.
Another 27 companies that already have at least one Black director also pledged to encourage corporations broadly to accelerate efforts to get full representation on boards. They include Nasdaq, Nordstrom, United Airlines and Verizon.