NEW YORK — In the aftermath of George Floyd's murder in 2020, investor Melody Hobson recalls frequently receiving calls from directors of Fortune 500 companies asking for references to diverse board candidates. Right now, she says, it's “very sporadic.”
“There were dozens of them during the George Floyd era,” said Hobson, who is co-CEO of Ariel Investments and also sits on the boards of JPMorgan and Starbucks. “Those requests have decreased dramatically.”
Over the past year, Reuters and other media outlets have reported that a backlash against diversity, equity, and inclusion (DEI) policies by some conservative activists rob companies of their enthusiasm for them.
Interviews with corporate directors and advisors, and recent research on painting corporate boards A bleak picture How remarkable was the aftermath of that backlash?
The percentage of new Russell 3000 companies with black directors will drop from 26% two years ago to 12% in 2024, according to a study by business research group Conference Board and data firm Esgage. At the same time, the number of new white directors has rebounded from a historic low of 52% in 2022 to 69%.
Directors and board advisors say the conservative opposition is lawsuit Some experts say DEI policies have been pushed down companies' priority lists, often in subtle ways. may accelerate Under the incoming administration of Donald Trump.
“It's not that it doesn't matter, it's just that it doesn't matter,” Hobson said, referring to how companies are currently thinking about board diversity. In the long run, “we'll continue to move in the right direction,” she said.
For example, one recruiter said that many companies do not make a diverse list of candidates a top priority when selecting board members.
“A few years ago, there were more searches where diversity was the first or second criterion,” said Richard Fields, head of the board effectiveness practice at search firm Russell Reynolds.
DEI policies have been strengthened after the killing of Floyd by a white police officer sparked nationwide protests and galvanized the Black Lives Matter movement.
Investors and their advisory firms used shareholder power to pressure companies to hire people from diverse backgrounds into senior positions. Companies hired more diverse board members.
This initiative has resulted in greater gender and racial diversity than ever before on the boards of large U.S. companies. Currently, about 12% of S&P 500 boards are black.
Diverse Boards Mean “Better Business”
Distribution still lags behind social composition. According to U.S. Census Bureau data, 14% of working-age adults are Black.
For a broader range of companies, the difference is even wider. According to the Conference Board, only 8% of directors of Russell 3000 companies are black.
DEI advocates worry the backlash could undermine efforts to address long-standing inequities and underrepresentation of diverse communities, and hurt business interests.
“It has been shown time and again that building diverse boards ultimately leads to better business,” said Lisa Davis, managing director at advisory firm Teneo.
Andrew Jones, head of ESG (environment, social issues and corporate governance) at the Conference Board, said the decline in diverse new hires on corporate boards has a lot to do with cultural change.
“2020 saw initial momentum when social unrest followed the death of George Floyd and corporate DEI was at its peak. Then, following last year’s Supreme Court decision, many legal and political scrutiny,” Jones said.
that decision It effectively banned a policy long used to increase the number of underrepresented minorities in American universities.
“I don't think it's overt racism, it certainly exists, but maybe people don't feel as much need or pressure to address it,” Hobson said.
Reflecting on the decline in reference requests for diverse director candidates, Hobson said, “I think they were responding to the market with market outreach, but the market is now not as demanding on these issues.'' ” he said.
