by BLACK ENTERPRISE Editors
February 14, 2024
BY MATTHEW SCOTT
The editors of BLACK ENTERPRISE produced our annual “Power in the Boardroom” report, including the 2023 B.E. Registry of Corporate Directors—our exclusive listing of Black board members. Efforts to increase the number of Blacks in boardrooms have reached a significant crossroads.
This editorial package represents our 10th review of Black representation within corporate governance, and BE editors have once again researched the universe of S&P 500 companies to gain a comprehensive picture of such inclusion at the highest level.
The data revealed the following snapshot of Black boardroom power: Amid the S&P 500, there were 490 Black corporate board members at 420 corporations in 2023, versus 474 Black corporate directors at 421 companies in 2022. The figures for 2023 reveal 84% of the S&P had Black directors, up from 60% in 2016, the first year BE reported on board diversity across the entire index.
This year, data from various reports suggests that while the number of Black directors has increased in recent years, that progress has been slowing.
A report from the 2023 KPMG Board Leadership Center and the African American Directors Forum found that immediately following the murder of George Floyd in May 2020, significantly more Blacks were appointed to corporate boards of Fortune 1,000 companies. According to the report, as of September 2022, 76% of Fortune 1,000 companies had at least one Black director on their boards, compared to 61% at the end of 2020. However, 40% of Black directors joined Fortune 1,000 boards after June 1, 2020, 28% joined between September 2020 and September 2021, and only 9% joined between September 2021 and September 2022. This marks a noticeable decline in the percentage of new appointments.
Additionally, a Spencer Stuart report revealed that Black directors made up 15% of the newly appointed directors of S&P 500 companies as of August 2023, a drop from 26% of newly appointed directors over the same period in 2022.
COURT DECISIONS, DEI BACKLASH, AND IMPACT ON BOARD DIVERSITY
Over the last year, forces that oppose diversity, equity, and inclusion have successfully used the courts to challenge such policies. However, experts differ on the severity of the impact that these court decisions and the additional backlash against diversity will have on the appointment of Blacks to corporate boards.
Denise Hamilton, DEI strategist, CEO, and founder of the professional women’s digital platform WatchHerWork, says the court’s decision to suspend the Fearless Fund’s exclusive financial support of Black women-owned businesses has corporations that sponsor such programs (or considering such sponsorship) concerned about lawsuits. Fear of litigation is having a diminishing effect on all types of diversity programs and corporate policies, including board inclusion, she says. “Corporate leaders don’t want to mess with this. It’s just easier to pull back.”
Dail St. Claire, an independent director at Verde Clean Fuels, a renewable energy company based in Houston, adds that court decisions to strike down California’s laws that mandated publicly traded companies headquartered in the state meet minimum requirements for the representation of both females (SB 826) and persons from underrepresented groups on boards (AB 979), will likely slow the appointment of Blacks onto corporate boards.
“The California law was aggressive,” St. Claire asserts, adding that the law’s quotas for historically underrepresented groups led to the unsubstantiated presumption that unqualified candidates would take positions away from qualified ones. While St. Claire has never advocated for quotas, she says there is evidence that “the now defunct California corporate board quota led to increased board diversity and policies that facilitated a more diverse workforce.”
Hamilton suggests the California and Fearless Fund decisions, this year’s Supreme Court ruling on affirmative action in college admissions, and other lesser-known cases nationally are part of a DEI backlash and “a coordinated effort” to reverse any effectiveness DEI initiatives have created.
“It’s all about setting a [legal] precedent,” says Hamilton. “The precedent is being set to be able to go after corporations with deep pockets in an effort to stop all diversity programs and initiatives from happening.”
While litigation is indeed a concern for corporations, DeForest Soaries, an independent director at Ocwen Financial Corp. and Independence Realty Trust Inc., doesn’t expect the Supreme Court’s prohibition against the explicit recruitment of Black students for college to have any effect on the recruitment of Black directors. He reasons that board diversity policies cover “people of color,” which is not limited to Black people.
However, Soaries does suggest that from this point forward, the growth of Blacks on corporate boards will decelerate. George Floyd’s death provided a window of opportunity to advance the number of Blacks on corporate boards by bringing unusual attention to racial disparities and inequities. That focus improved governance diversity practices, but Soaries says the beneficiaries were concentrated among “Black people that were already corporate directors or were in the pre-existing pipeline based on their relationships.” Many Blacks who were already directors gained additional board appointments, and Blacks with strong relationships with non-Black directors were the first to be recruited for board seats. That type of growth is unsustainable.
“The numbers will continue to grow slowly unless companies do a better job reaching beyond the relationships of existing board members to recruit Black candidates,” Soaries says.
Similarly, Guy Primus, co-founder of The Board Challenge, an effort to get companies that do not have a Black board member to appoint one, also believes a great deal of the significant growth in the number of Blacks on corporate boards has already occurred. Primus, who sits on four private company boards, says that companies that believe in diversity will continue to add Black board members, those that expand the numbers of Black members for performative reasons have done so already, and those that never believed in diversity probably won’t ever appoint one. He hopes that future progression lies with those companies that have yet to include a diverse board member but might be convinced to do so. “I’m hopeful they see the positive results that others have experienced because that’s how we’re going to continue to increase Black representation,” Primus says.
BUILDING A FOUNDATION FOR GROWING BLACK BOARD REPRESENTATION
Mike Wright, executive vice president, head of human resources and diversity practice of executive search firm Seiden Krieger Associates, and former board director at Mobiquity Technologies, says he has noticed that CEOs and boards that are committed to diversity are putting in infrastructure that makes it very difficult for their organizations to abandon DEI and other diversity programs. He says they’re willing to risk potential backlash because “There’s data out there that supports the fact that companies that are diverse tend to be more profitable and have better business results.”
In addition to implementing the data on the success of diverse companies into their business operations, Wright says companies will need to commit to mentoring and allyship in the boardroom to increase the number of Black corporate directors. “They must make a conscious effort to partner with The Executive Leadership Council, The Alliance for Board Diversity, and other organizations that are trying to drive this agenda.”
Ariel Investments, which holds an annual Black Corporate Directors Conference, is an organization dedicated to increasing the quantity and quality of Black corporate directors. John Rogers, founder, chairman, and co-CEO of Ariel Investments, says having Blacks on corporate boards can be helpful, but they must “be willing to speak up and speak out.”
At an October meeting of the New York State Black Business Alliance, Rogers, who serves on the boards of Nike and The New York Times and can be found on the BLACK ENTERPRISE Registry of Corporate Directors, explains how Ariel’s conference brings together more than 200 directors to network, fellowship, and learn from each other about boardroom leadership. Over the past 22 years, attendees have been addressed by corporate powerhouses and BE registry members like Ursula Burns, Ken Chenault, and Bruce Gordon, as well as CEOs such as Jamie Dimon of JPMorgan Chase and civil rights activists like Rev. Jessie Jackson and Rev. Al Sharpton. Many speakers have charged those in attendance with a responsibility to fight for economic justice in the boardroom. “We need to do a lot better on board diversity, and we’re trying to make a difference with our conference,” Rogers says.
James D. White, board chair of The Honest Company, lead independent director of Affirm Inc., and a board member at Cava and Greenlight, agrees that putting more Blacks on corporate boards is not enough. White co-founded the UC Berkeley Directors Academy, which prepares Black board candidates to not only become board members but also to chair committees and become lead independent directors or board chairs. “We need to be prepared to step into boardrooms to lead and impact the overall governance of the board,” he says.
The Ariel conference, The Berkeley Directors Academy, and The Black Corporate Board Readiness Program at Santa Clara University, among others, have all contributed to identifying and preparing potential Black corporate directors. While the legal challenges and diversity backlash continue to slow the short-lived expansion in the number of Black directors, the good news is that more Black leaders are on boards than ever. Many of them are in a position to wield influence throughout the organizations they serve. Because of that fact, Hamilton and others are optimistic about future development.
“We just have to keep getting and staying in a state of readiness—improving our skills and relationship building until the next opportunity,” Hamilton says. “Right now, there’s backlash, but two years from now, who knows what the situation will be?
Matthew Scott is the former managing editor of the Financial Times’ Agenda newsletter and Black Enterprise Magazine. Based in New York, he writes about corporate governance and investing topics.
