This article examines the diversity of Fortune 100 companies' boards, and questions the current metrics used to disclose diversity of board members. Due to the lack of uniformity of diversity disclosures, is the picture painted by some companies comprehensive enough to truly show diversity on their board?
The topic of diversity has grown in importance over the past decade. Large companies are spending time and resources discovering how having a diverse board of directors is affecting their company's image, perception, and profits. Many companies focus on appointing employees with different education, experience, race, and backgrounds. This is illustrated through companies' diversity statements. For example, Amazon.com, Inc. in their 2019 Proxy states,
"We take seriously our commitment to diversity and respect for people from all backgrounds, including gender, race, ethnicity, religion, sexual orientation, disability, and other dimensions of diversity, which are enduring values for us as reflected in a number of Company policies, including the Amazon Global Human Rights Principles."1
Even with inclusive diversity statements, such as Amazon.com, Inc.'s, when calculating how diverse companies' boards are, two main diversity metrics are used: gender and race. While acknowledging the positive effects of having a diverse board and showing how diversity is being valued in a company is important, examining how transparent companies are with their diversity metrics shines light on a company's commitment to diversity.
Why is Board Diversity Beneficial for Companies?
The decisions that the board of directors make for corporations are critical for their success. The board impacts how the company is run by making crucial decisions on executive pay, dividend policies, setting yearly goals, and conducting any other business that concerns shareholders. Having a board composed of people with different backgrounds and experience will enrich conversations and allow the board to approach problems with new perspectives and ideas.2
Companies should actively try to understand and represent their clients and customers. In doing so, better marketing decisions and tactics can be set. For example, "Having a diverse board can help you better understand purchasing and usage decisions, particularly as studies have found that women drive 70-80 percent of purchasing in the United States."2
CGLytics data of board diversity reveals the percentage of gender diversity and nationality dispersion on boards of Fortune 100 companies.
As depicted in the following graphs, Fortune 100 company boards are composed of mostly American men. Unfortunately, we can not determine percentages of race within these companies because very few companies disclose information on race/ethnicity. The missing data and the lack of transparency from these companies questions their commitment to diversity.
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