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After two decades of improvement, recent research from Heidrick & Struggles, the executive search and management consulting company, found that fewer board members were appointed in 2022 that were first-time directors, women, and from diverse ethnicities or backgrounds.
Women directors, in fact, saw the lowest number of appointments since 2017, while the percentage of Black directors dropped by nine percentage points in 2022. This comes on the heels of some of the US’s largest companies gutting DE&I gigs at a higher rate than non-DE&I gigs.
But what drove last year’s decline in diverse board appointments? The Heidrick & Struggles report suggests that organizations may be turning to board candidates with CEO or CFO experience to navigate ongoing and projected macroeconomic uncertainty, a group that is historically not diverse. Additionally, one expert told CFO Brew that reliance on closed networks and weak corporate commitment to board diversity could also be contributing factors.
Tip-toeing to diversity. Many companies’ first priority for director candidates is someone who can provide expertise, M.K. Chin, a management professor at the Indiana Kelley School of Business, told CFO Brew.
Directors and company leaders should consider becoming more mindful when assembling their networks and be diligent about seeking candidates that possess professional and demographic diversity, Valerie Nielsen, managing director at leadership advisory firm Longview Leader Corporation, told CFO Brew.
“That’s the value point because of the perspective they have, relevant experiences to contribute, and then they have their cultural identity to bring so that you’re not thinking in a particular mode,” Nielsen said. “It just requires slightly more effort and more awareness on decision makers to be better.”
Jane Foutty, executive chair of the board of directors at Deloitte, contributed to a recent piece in the MIT Sloan Review, which notes that making sure that nominating committee members have a diversity of experience and expertise as well as setting clear diversity expectations and goals are key steps to improving the diversity of board candidates.
Bringing it to the bottom line. It’s also about prioritizing and communicating a commitment to diversity to the broader organization.
“Subject matter experts got to connect it to those three areas: revenue and growth, cost containment, and brand and reputation, otherwise, senior leaders don’t hear you,” Nielsen said.
However, macroeconomic pressures like inflation and the threat of inflation may dampen those messages, as organizations may be prioritizing experience and expertise.
“While they’re pursuing the best way to handle this upcoming recession, this diversity issue is probably not the top criteria,” Chin said.—LR