Employ Me Today

In trying economic times, corporate board members face complex challenges and are forced to make difficult decisions. The caliber of the individuals sitting around the boardroom table can mean the difference between a company’s long-term success and failure. Bringing experienced, savvy women and people of color on the board is a smart move in any economic environment, but it is particularly important now. Diverse voices can sometimes better identify new opportunities, provide a different point of view, and bring fresh ideas and solutions to the discussion. Diversity pays dividends—as boards with more diversity outperform their counterparts.

In the past, and in large degree even today, board members tend to be drawn to people they know when they look to fill board openings—those who have sat next to them on other boards, are part of their personal network, or appear often on the business pages of newspapers or websites. It is natural for people to seek familiarity when confronted with uncertainty. However, bringing on board members for the sake of comfort is the opposite of what companies should do.

A survey conducted in 2006 by the National Association of Corporate Directors found that two out of three board nominating committees favored diversity initiatives to attract more women and people of color as directors. While these initiatives might not be top of mind right now, there is ample evidence that they should be. Research shows that companies with a diverse board perform better.

According to Catalyst, a nonprofit organization that studies inclusive workplaces, companies with higher percentages of women board directors, on average, outperform those with the lowest percentages of women board directors on a variety of financial measures. For example, return on equity for companies with the highest number of women directors was 53% higher than for those in the bottom quartile.

Nevertheless, the percentage of women and minorities on corporate boards remains low. A report on Fortune 100 boards released by the Alliance for Board Diversity in January 2008 found that women and minority men held just 28.5% of board member seats in 2006, the most recent year for which information is available. The percentage remained flat from the previous study done in 2004.

African American men held 7.14 percent of board seats on Fortune 100 boards in 2006, down from 7.78 percent in 2006. African American women held fewer than 3% of board seats in both studies.

Among Fortune 500 companies, women held 15.2% of board director positions in 2008, compared to 14.8% in 2007, according to Catalyst. Women of color held 3.2% of board director positions.

Hispanics held 3.1% of all Fortune 500 board seats in 2006, according to a study by the Hispanic Association on Corporate Responsibility. Hispanic women held 44 board seats, or less than 1%, of all Fortune 500 corporate directorships.

While boards often say that they cannot find female or minority candidates with the experience required to serve on a board, they may need to broaden their search. For example, rising stars who head large divisions or senior functional leaders may be excellent candidates and eager to make a contribution. If a board faces a particular strategic challenge in information systems, marketing, or M&A, talented functional leaders can bring perspective and a specific depth of experience to the table. In addition, recently retired women and minority executives can bring current thinking and the gift of time to devote to board service.

Where do companies find these people? They are not often the “obvious” candidates. Search firms with diversity practices, such as Heidrick & Struggles, are a good place to turn. Kevin Kelly, CEO of Heidrick & Struggles, says “we are committed to ensuring our candidate slates are diverse.” Associations serving women and minority professionals, such as Women Corporate Directors, Catalyst, The Executive Leadership Council, and the Hispanic Association on Corporate Responsibility also can help identify board-ready individuals from diverse backgrounds. Susan Staatsburg, cofounder of Women Corporate Directors recently said “WCD believes on-the-ground networking in major cities around the globe can help link talented women with board opportunities.”

The economic recession presents an opportunity for boards of directors to expand their vision of who should sit on the board. Recruiting women and minority directors can result in the fresh ideas necessary to address today’s issues, as well as tomorrow’s.