Leading Diversity in the Boardroom 

Board roomIntroducing new perspectives to your company’s board of directors.

By David H. Hoffmann and Alexandra Hendrickson

Cheryl Shavers understands how change can transform a business in a nanosecond and how for-profit corporate boards need to anticipate change. Having spent 25 years in the high-tech industry in engineering and managerial positions at Motorola, Hewlett-Packard and Intel Corp., she lived in a world that changed every day. “The people at those companies are used to taking risks,” says Shavers. “From designing complex systems to integrating off-the-shelf parts, they know how to put things together.”

When she joined the board of Rockwell Collins, Dr. Shavers discovered it to be a complex business with highly specified products and time-honored contracting procedures. “I come from an environment that operates at a different pace. Every board needs to look at the world through other people’s eyes. The world is changing and you are more likely to see it coming if you have diversity on your board. That means diversity of experience, cultural background and gender,” explained Dr. Shavers, who is African-American. “At Rockwell Collins, I provide a different kind of reality check.”

Successful companies today have management that is younger, more diverse and globally oriented. Diversity in the boardroom likewise produces better decisions and stronger companies. Yet the number of women and ethnic minority directors is increasing at a snail’s pace. According to Douglas Branson, a professor of corporate governance at the University of Pittsburgh School of Law and author of “No Seat at the Table,” a study of for-profit board composition and trends (New York University Press, 2007), while women are egregiously under-represented on corporate boards, holding only approximately 15 percent of the seats, persons of color are much more so. As of 2003, African-Americans and Hispanics held only 4.1 percent of the directorships in the Fortune 1000.

Even when inviting participation from international representatives would seem imperative for any company that is expanding globally, major U.S. companies show a lack of imagination. None of the Fortune 200, for example, has any Chinese board members.
Both a proactive approach and creativity are essential when searching for diverse individuals with the right skills and experience willing to commit to board service. The following ideas and tools may help you identify and recruit outstanding women and diverse candidates for your board.

Formalize the Selection Process
Sarbanes-Oxley’s requirement that board members be independent and that relationships be disclosed caused corporations to re-evaluate their board’s independence in the recruitment process. The response of some companies has been to put in place a more disciplined process for board selection to mitigate the influence of the old boy’s network.

These steps have included:

  • Sending a strong message to the nominating or governance committee of the board to search for suitable women and persons of color to nominate.
  • Developing a profile of board member competencies and rigorously measuring candidates against those competencies. This includes assessing the importance of such key elements as industry knowledge, financial skills, and strategic management experience.
  • Considering board term limits. These allow corporations to reinvigorate the ranks of their boards with individuals with fresh perspectives.
  • Expanding the election system to ensure more open participation by the entire board.
  • Benchmarking against best practices in recruiting and selecting board members.

Seek Third-Party Help
With a more disciplined process for selection in place, boards are seeking outside assistance to identify good candidates. As a result, executive search firms have become key players in the selection process.

In the past, CEOs may have made the initial contact with a board candidate and recommended the candidate for a second round of interviews with the nominating committee. Increasingly, search firms are retained to identify independent candidates and make recommendations directly to a member of the nominating committee while the CEO plays a less prominent role in the process.

Board searches are much more sensitive than a search for a management executive because C-level egos are at stake. This is even truer in a search where diverse candidates are involved. Minority board member candidates with outstanding skills and experience may resent being presented to governance committees as “diversity candidates.” A search firm with experience in board recruiting can be a dispassionate intermediary in conducting the board search without leaving bruised egos.

When selecting a search firm, be sure to consider the following:

  • Be comfortable with the recruiter you are working with and make sure there is a good cultural fit between you and your search team so that they are sensitive to your objectives.
  • Look for a firm with a track record in identifying diverse candidates for board seats.
  • Ensure the firm has a demonstrable track record of conducting successful board searches for women and diverse candidates in the past.

Look Beyond Trophy Board Members
Women and minorities serving on other boards might seem to be a safe bet. If other boards chose them, they must be good, right? This might be true, but there are persuasive reasons for looking beyond individuals who serve on multiple boards. Douglas Branson says that especially among African-Americans and women, the number of trophy directors is growing by leaps and bounds. He highlighted Shirley Jackson, the African-American physicist and President of Rensselaer Polytechnic Institute, who serves on five for-profit boards as well as the board of the New York Stock Exchange. If your company is smaller, you may not be able to attract “trophy” board members like this. Even if you could get their attention, they may be stretched too thin and fail to be effective.

Fortunately, there are many highly qualified women and minority candidates in the marketplace who can help make good decisions for your company but who may not currently be on a board. After all, each of today’s experienced directors started somewhere.

Dr. Shavers was the former head of investment strategies for the Microprocessor Sector Group at Intel Capital and Under Secretary of Commerce for Technology at the Department of Commerce when she joined Rockwell Collins, her first board. Her experience in strategy, technology assessment and international business was valuable to the manufacturer of aviation electronics and communication equipment for commercial and military aircraft. “I was chosen for Rockwell Collins’ board because I really liked its technology,” Shavers said. “Also, Rockwell’s mix of commercial and military business matched my background of government and private sector experience.”

Seek Out Fresh Faces
Board search committees often get hung up on titles and business size. There is a tendency to immediately reject candidates who are younger or who are at the Vice President or Executive Vice President level. Corporate boards also tend to shy away from candidates from smaller companies, even though these individuals may have superb practical experience in areas like marketing or competitive strategy. Smaller companies and the ranks of up-and-coming executives may be excellent sources of female and minority talent.

Furthermore, these days a lot of people who held senior corporate jobs are financially able to retire when they are in their 50s. They are out doing things like running their own consulting businesses. This group has a first-rate pool of female and minority board talent. Corporate boards don’t think twice about inviting a retired 60-year-old white male to join. To get talented minority executives, board search committees may need to think the same way.

Globalize
A key consideration when seeking international board members is to ensure that they understand U.S. business and practices. Foreign executives with management experience at American or multinational companies are a logical source of talent, as are managers from overseas companies with a lot of experience selling to or buying from U.S. companies. If they live overseas, of course, the challenge is to get them to meetings.

“It’s very tough to get international people who are not located in the U.S. and make it work,” says Jim Cederna, President of Cederna International, a business coaching firm, who is on the board of Mine Safety Appliances Company and heads the Nominating and Corporate Governance Committee. “I don’t know any boards that meet less than five times a year. For an international board member, traveling overseas for board meetings is a major time commitment.” Recruiting board members with international experience can work, Cederna says, particularly if the individual has actually lived and worked overseas, not just worked on projects there.

Granted, recruiting women, minority and international candidates is no small feat. But the payoff—providing your company with valuable and needed expertise—can be well worth the effort.

“A board often functions much like fog lights on a car. You don’t need them very often, but they are great when you do need them,” says Branson. “The board’s purpose is not ‘hands-on’ managing or improving profitability. The board’s highest and best calling is to engage in succession planning, give advice (when asked), lend perspective and ward off disaster. Diverse candidates have much to offer a well-run board.”

David Hoffmann is Chairman & CEO of DHR International, the fifth largest executive search firm in the United States. Alexandra Hendrickson serves as Executive Vice President in the firm’s Pittsburgh office. For more information, visit www.dhrinternational.com .