Senior Client Partner, ESG and DE&I Strategist
Has Resistance to Board Diversity Escalated?
On the surface, it’s a rule that doesn’t seem particularly controversial. A major stock exchange wanted to ask its listed companies to disclose the demographics of their boards.
Last summer, Nasdaq’s new board diversity rules were approved by the Securities and Exchange Commission.
But just before the new year, 17 states joined an existing lawsuit against Nasdaq, saying the stock market’s rule to promote diversity on corporate boards establishes illegal “quotas” that discriminate against men and white people.
The new challenge might have been missed because of its timing. But corporate diversity efforts— whether it’s a high-profile move like Nasdaq’s or an individual company’s efforts to attract more talent from underrepresented groups — could well face more resistance, experts say. Just this week, the US Supreme Court agreed to hear arguments about race-conscious admissions policies at Harvard University and the University of North Carolina. “Trying to eradicate all forms of resistance is like trying to eradicate all forms of COVID,” says Andrés Tapia, Korn Ferry’s global strategist for diversity, equity, and inclusion (DE&I).
Indeed, 2022 could shape up to be the year when many assumptions about how to create diverse institutions will be challenged. Since the George Floyd killing in 2020, institutions and companies around the world have launched efforts to find and develop diverse talent, whether they be students or workers, from underrepresented groups. Many of the efforts have been applauded and increase representation. But critics say some of the moves have been both costly and ineffective — and worse, they claim, in some cases such efforts are replacing the poor treatment of one group with the poor treatment of another.
Experts say that leaders should probably not focus on trying to win over people who may be diametrically opposed to diversity, equity, and inclusion programs. “The 15% of resisters could wind up taking 85% of your time,” Tapia says. Instead, he advises leaders to energize the people who support the initiatives while also targeting people who may be unsure of the program’s benefits.
In Nasdaq’s case, the stock market requires that boards lacking any self-identified women and at least one underrepresented minority or LGBTQ person must explain why. The effort comes amid steps that other groups in the financial industry have taken to promote board diversity. Since 2020, Goldman Sachs, for example, has refused to underwrite initial public offerings for companies with all-white, all-male boards with no LGBTQ representation. And starting this year, the shareholder-proxy advisory firm Institutional Shareholder Services will recommend voting against directors of all Russell 3000 or S&P 1500 companies whose boards it deems not diverse enough.
For her part, Alina Polonskaia, Korn Ferry’s global leader for diversity, equity, and inclusion solutions, says there is evidence from multiple studies that increasing diversity throughout a company can improve its business performance and that leaders who share such data may help bring people together. “Put facts on the table,” she says. “If you don’t, it becomes a war of opinions.”