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The new diversity on the board.

Just as many corporations are restructuring the way they do business, they are also restructuring their boards of directors in response to dramatic demographic changes, increased shareholder activism, and the emergence of a truly global market. While most board seats continue to be held by white males, the trend is toward achieving a diversity of viewpoints, experiences, and cultural backgrounds that can be turned into competitive advantage.

Boardroom diversity has moved beyond rhetoric. This trend is motivated not so much by altruism as it is by a recognition that diversity makes good business sense: Diversity contributes new sources of energy and creativity and different perspectives that should add up to more comprehensive deliberations by a board.

CEOs cite a variety of reasons for favoring heterogeneity on their boards over a single demographic profile. Diversity encourages an awareness of cultural, linguistic, and social nuances that is required for successful marketing strategies. And increasingly sophisticated consumers are using their buying power as a lever to encourage certain kinds of behavior and policies.

Investors, too, cede more trust and, therefore, more latitude to boards that appear to grasp and appreciate their full range of interests. Institutional and individual holders are demanding that boards take into account the needs of all the publics in their sphere of influence.

Corporate leaders are pursuing diversity in their work forces and their boards of directors as a strategic business objective, not just a demographic happenstance. These efforts are yielding results.

A study, The New Diversity: Women and Minorities on Corporate Boards, recently released by our firm of the largest public companies in the U.S. shows that representation by women and minorities on boards of directors has increased by more than 20% in the last five years. Today, nearly six out of every 10 companies, or 59%, have elected a woman or a member of a minority group to their boards. Sixteen percent of the 806 companies we studied had two or more women as directors, and another 6% had two or more minorities represented. Another noteworthy finding is that non-U.S. directors now account for 3% of the total.

Using these data, we project that by the turn of the century, more than 70% of the largest 1,000 U.S. companies will have a woman as a director, and more than 40%, a minority member. Together, these two groups should account for 15% of all directorships by the year 2000, compared with 9% today.

But upon closer examination, these statistics are not as encouraging as they first appear. For one thing, while board representation by women has risen 35%, it has remained relatively flat for minorities. For another, corporations seeking minority directors are reaching out to the same people, despite the fact that there is an untapped pool of qualified candidates.

Ten strategies for achieving diversity on corporate boards have emerged from our conversations with CEOs, and we list them in the accompanying box.

Diversity won't occur spontaneously. It is a valuable asset that must be addressed with energy, resources, and consistency, and managed accordingly. It is not an end in itself but a means to greater accountability with the potential for economic reward.

Strategies for Achieving Diversity

1. Consider diversity as a bottom-line economic issue.

2. Emphasize your own commitment to the role of diversity as part of good corporate governance.

3. Review your nominating practices to determine ways that the board can be more proactive in selecting highly qualified women and minority candidates for board service.

4. Appoint a task force to study the issue.

5. Assess your constituencies -- current and future -- to determine whether they are represented on the board.

6. Identify nominees from a wider scope than you have traditionally considered: geography, industry, and functional areas.

7. Begin to identify rising stars who could be the directors of tomorrow.

8. Draw up a wish list of potential nominees. Ask them.

9. Communicate your commitment to diversity as a business strategy to your key publics, including shareholders and employees.

10. Use the foregoing strategies to develop an ongoing plan of action for implementing diversity and evaluate your progress.

Robert E. Hallagan is President and Chief Executive Officer of Heidrick & Struggles Inc., a leading executive recruiting firm. Theodore Jadick is Managing Partner of the firm's New York office and Partner-in-Charge, Heidrick & Struggles Board Practice.
COPYRIGHT 1993 Directors and Boards
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Leadership in Environmental Initiatives; board of directors
Author:Hallagan, Robert E.; Jadick, Theodore
Publication:Directors & Boards
Date:Sep 22, 1993
Previous Article:A guide for policies on stock ownership.
Next Article:Welcome to the board: diversification personified.

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