The call for greater boardroom diversity is not merely a matter of political correctness; it’s a matter of modern business planning, and most of all, a matter of regulatory compliance. And yet, despite the strides being made here, there is still much more ground to cover, and progress seems to be awfully slow in the arrival. What’s going on?
We are all familiar with SEC regulations that call for a greater boardroom diversity, citing that a broader range of mindsets, viewpoints, areas of expertise, and professional backgrounds can provide more meaningful top-level oversight and strategic vision for an organization. We are living in an increasingly diverse world, and the Board presence and upward mobility for women and professionals of different ethnic groups is a world beyond where it was 30, 20, or even 10 years ago.
And yet, we see in more than a few industries a condition that I’ve heard referred to as PMS—everybody at the top is “pale, male, and stale.” The insurance world is proof enough of this: while there is a robust desire among independent agents and brokers to include women and members of different ethnic groups into the uppermost echelons of leadership, we simply don’t see it all that often at the insurance carriers themselves (although, there are some notable exceptions). Rather, the leadership is all too often male, all too often pale, all too often stale. (That said, I hasten to point out the Starr Companies, whose chief marketing officer—and friend of mine, in the interest of full disclosure—is also a compelling exception to the rule.)
Even here, there are exceptions, though. Mass Mutual had an interesting directive where its sales force had to match the ethnic diversity of the United States, pegging their own internal benchmarks to demographic information profiling the entire country. That struck me as an interesting way to go about it, defensible to even the most hidebound of reactionaries. In fact, it struck me as a way to go about it for plenty of other companies in plenty of other industries, as well.
We have seen calls for greater diversity all across the business world. Silicon Valley is one area where we are hearing it quite a lot, but problems are by no means confined there. Even though the number of female Board nominations has doubled to some 30 percent, it’s still a full 20 percent below the halfway point, making one wonder what the holdup might be. After all, this is not just a feel-good benchmark. This is something that the SEC has already written rules on. Why? It’s not just because it makes the SEC feel better. It’s because we have seen what happens to companies and industries that suffer from an echo chamber of thought and decision making when the only ones making the big decisions are “one of us.”
There is conflicting data between whether or not a more diverse board will lead to better economic performance, or if it makes no difference. So far, I have seen more data suggesting the former rather than the latter, but in the end, what matters most for compliance officers is that board diversity is a matter of law. If it were just as important a matter of corporate culture before, during, and after the major crises that tend to prompt additional rulemaking from the federal authorities, then perhaps the law itself would be unnecessary.