I just read some surprising statistics about the lack of diversity on corporate boards and why this matters. Stick with me on this topic. This information explains a lot, and I promise it will give you new perspective on why the glass ceiling stays in place for women and minorities—and what needs to change.
The Big PictureI live in Massachusetts where a combination of universities, foundations, and local news organizations have come together to put a spotlight on the lack of diversity on the boards of publicly traded Massachusetts companies. Research reported by the Boston Fund and the Boston Globe in late 2015 showed the following:
- 80 percent of directors of publicly traded companies in Massachusetts are white men, while white men make up only 36 percent of of the state’s population.
- Minorities make up 7 percent of directors and are 26 percent of the population.
- Women make up 16 percent of the directors (and some of these are also women of color), yet make up 50 percent of the population.
Turnover Is Low on BoardsOne of the answers to the question of why boards are slow to diversify is that turnover is very slow. In fact Shirley Leung of the Boston Globe explains:
- Turnover of corporate board seats in Massachusetts is only 7 percent per year because there are no term or age limits for most board seats. This is also true nationally, and many directors stay in their seats for decades.
- The incumbent white men do not want to give up their seats. Why would they? The median pay for corporate directors was $258,000 per year in 2014 for fewer than five hours of work per week. In addition, the pay for directors has risen faster than the wages for average workers.
Why the Impact on the Glass Ceiling Is HighThe impact of boards that are not diverse on the glass ceiling for women and minorities is high: only 3–4 percent of corporate CEOs nationally are women, and only five Fortune 500 CEOs are black. Making this link between the lack of diversity on boards and the glass ceiling was an eye-opener for me, but think about it. Boards are responsible for hiring CEOs and they may well be overlooking talented women and minorities for CEO roles. Studies show that people tend to hire people who look like them and with whom they feel most comfortable. It’s a vicious cycle. Boards need to become more diverse in order to be more open to hiring women and minorities in CEO roles, yet you must be a current or past CEO to be considered qualified for most director seats. Because there are so few women and minority CEOs to draw from, boards continue to lack diversity, and the glass ceiling stays in place. One author recently proposed that the solution is term limits for directors so that seats can open and be filled by more women and minorities. Boards will also need to expand their criteria for eligibility to talented individuals who may not yet be CEOs to fill these seats as they open. As is happening now in Massachusetts, these changes are only going to occur if there is a lot of public pressure. What can you do? Here are some suggestions:
- Write to your local newspaper and explain why diversifying corporate boards is important.
- Write to your legislator and demand that laws be passed to require boards to diversify.
- Educate your friends and neighbors about the need for boards to diversify.
- If you are an investor, exercise your vote or write about your concerns to the companies you have invested in.