In recent years, DEI initiatives have transformed from “nice-to-have” into “must-have” elements of an organization’s strategy, and this positive progress cannot be overemphasized. But although DEI initiatives require support from all levels of an organization, boards of directors may be uncertain about how to become involved in DEI, especially as many may not see themselves as directly linked to these initiatives. Fortunately, there is one linkage that facilitates extensive opportunities for boards of directors to support DEI: the connection between a board of directors and their CEO.
First and foremost, boards of directors and CEOs should work together to define their organization’s vision for DEI, because only then can they together incorporate that vision into the overall business strategy. For example, the board of directors from the Environmental and Energy Study Institute developed a resolution that established diversity, equity, and inclusion as core values of their organization. But beyond these early efforts, boards of directors are also in the perfect position to hold CEOs accountable for their implementation of DEI initiatives. This blog is the first of three on the subject, and today we will explore how boards of directors can hold their CEOs accountable for diversity.
A crucial starting point is for boards of directors to ensure CEOs are tracking the demographic statistics (gender, race, veteran status, disability, etc.) of employees at all levels of the organization. Reviewing the organization’s EEO-1 filing is often a good first step, but ideally a more comprehensive set of data should be collected. Hanneke Faber, president of Europe for Unilever, puts it well: “‘You get what you measure…. you need to know how many minority employees you have and at what levels in your company; you need to set a goal to improve it, and you need to talk about it every quarter.’” As simplistic as this step may seem, the importance of possessing accurate statistics about an organization’s demographics cannot be overstated.
Once these statistics are in hand, boards of directors should ensure CEOs are overseeing the comparison of this data to both the demographics of the organization’s surrounding community and those of the customers the organization serves. From there, target goals can be put into development. For example, if the community has an Asian population of 17% but the organization only employs 3%, this lack of ethnic diversity can be precisely identified. Furthermore, the organization’s demographics should also be compared to such statistics of other organizations within and outside of one’s industry that are leading in DEI (assuming that data is available for public perusal).
Not only should boards of directors confirm CEOs are tracking static employee demographics, but they should also ensure CEOs are tracking hiring demographics (e.g. of women, people of color, disabled people, LGBTQ+ people, etc.) to determine that diversity initiatives are being implemented so as to produce tangible results. For example, the board of directors might check to see if CEOs are requiring that talent be sourced from diverse locations, such as historically Black colleges and universities, as well as building talent pipelines by offering internships to high schools/universities with higher percentages of underrepresented groups. A positive model to look to in this respect might be General Lester Lyles, the former chairman of the USAA board of directors, who championed the necessity “‘that people… of all backgrounds have an opportunity’” to be represented in every level of an organization. The search for talent is thus a significant stepping stone toward this goal. When it comes to hiring, boards of directors should similarly check to see if their organization has a policy in place that “requir[es] more than one diverse candidate [be considered] for each open position… throughout the company” and moreover that this policy is being implemented. Through the incorporation of these strategies, the board of directors (and their CEO) will ideally see improvement in diverse hiring from their organization.
Not only should boards of directors be aware of and involved in diversity initiatives for their organization, but the more open they are regarding these initiatives, the greater trust they can build with their community. Billie Williamson, director at Kraton Corporation, Cushman & Wakefield, and Pentair, argued that when boards of directors are public with diversity, it “‘sends a very clear message [about] what’s important to the company.’” As such, boards of directors should ensure CEOs are transparent about their organization’s diversity statistics and initiatives, both to employees and to the general public.
Together with their CEOs, boards of directors should also highlight their commitment to diversity “in communications to shareholders, in public appearances, in interviews and conference presentations, and informally in networking and professional conversations” as well as other applicable communications, including the organization’s website. Furthermore, boards of directors should confirm that their CEOs compare how other organizations within their respective industries describe their commitment to diversity, as knowing this presentation may shape the board’s and CEO’s desired description. In a similar vein, boards of directors should ensure CEOs look into the diversity policies and strategies of community partners and vendors, because there should be a standard the organization expects to maintain: simply put, a strong commitment to diversity is a non-negotiable requirement for partnership.
At the end of the day, boards of directors should be provided information every meeting about the status of diversity initiatives, demographic statistics, etc. for their organization because the board of directors is an instrumental component of ensuring an organization’s successful commitment to DEI. In this blog, we hope to have provided straightforward, tangible ways boards of directors can reach out to their CEOs regarding diversity, and we hope you’ll return for our following assessments on how boards of directors can hold CEOs accountable for equity and inclusion, too.
