Special Web-only Feature

Diversity has become a buzz-word in the corporate world as of late, and a shallow scan of diversity policies and initiatives can lead one to become optimistic about the future of equality in corporations. In fact, 75% of Fortune 500 corporations now have some policy relating to diversity. Upon deeper examination, the problem emerges: a lack of diversity that grows more obvious as you climb higher up the corporate ladder. Increasing numbers of diversity offices and practices are certainly positive steps; but they are baby steps in a corporate culture that desperately needs to move leaps and bounds in regards to diversity. And for a corporation to truly move, the orders must come from the top: this is where diversity is lacking, and why diversity remains a buzz-word rather than a reality.

Despite the fact that corporations are increasing initiatives to make diversity a top priority, women of color still face a "cement ceiling" at the board level. The numbers on diversity are striking: Women of color comprise only 2% of fortune 1000 board seats. The barriers to achievement for women of color at the top levels of corporate America are widespread. The reality is that corporations are not making diversity a priority where the most important decisions are made: the boardroom. The board of directors is responsible for overseeing the management and conduct of a company's business, including risk-management, financial policies, and monitoring the CEO.

Diversity initiatives are no longer about avoiding law suits or appeasing critics; the truth is diversity makes good business sense as it affects the bottom line of the company. If corporations are truly interested in diversifying the company in order to compete in the global marketplace, changes need to be made at the top in order to infiltrate all levels of the workplace.

Disparity Between the Marketplace and the People in Charge

Although diversity is increasing at the lower ranks of corporations, diversity is scarce on boards of directors. Women comprise 46.6% of the U.S. labor force, and 15.7% of corporate officers in the Fortune 500. Of the 57.8 million women in the workforce, 7% are Hispanic, 7% African American, and 4% Asian American/Other. Nonetheless, the most recent statistics show that out of the 11,500 Fortune 1000 board seats in 2002, women held but 986, or 13.7% of those seats. Minorities held 798 of those seats, roughly 6.9%. As mentioned above, women of color are the most underrepresented group on boards, holding only 2% of the Fortune 1000 board seats.
Moreover, of the 13.7% of board seats held by women, women of color hold only 18.1%, and the figures break down as follows: 74% are held by African American women, 17% by Hispanic women, and 8.4% by Asian Pacific Islander American women.

The Hispanic Association on Corporate Responsibility (HACR) recently released a Corporate Governance Study that finds Hispanic women only hold .3 % of all board seats in Fortune 1000 companies. While 141 Hispanics serve as board members in the U.S., only 21 of those are women. The study, acknowledges HACR President and CEO Anna Escobedo Cabral, recognizes the disparity between the marketplace and the people in charge. "Hispanic women, in particular, have encountered a 'concrete ceiling' in Corporate America. Even though there are more Hispanic women professionals and the number of businesses owned by Hispanic women is one of the fastest growing sectors, Hispanic women continue to be excluded from contributing as board members and executive officers of the largest companies in the nation," says Cabral.

Structures that Support the Ceiling

A major barrier for women of color is their lack of visibility at the top levels of corporate positions. Despite increasing numbers of initiatives designed to add diversity of background and experience to corporate boards, the majority of directors still come from the business sector, as CEOs or top executives. Therefore it is crucial for women of color to be well-represented in the corporate ranks if they hope to be considered for directorship. The reality, however, is that women of color have the hardest time moving up the corporate ladder.

A pyramid effect occurs as women attempt to move up levels in the corporate structure. At the officer level, women of color only comprise 1.6% of officers in Fortune 500 companies . According to the Harvard Business School Press, at the top managerial level, black women hold only 13.5% of positions, while white women hold 32.1%. However, at the lower management level, black women hold 39.9% of jobs compared to 19.8% for white women.

Ironically, within managerial positions, more women of color hold college degrees than their white female counterparts. According to Catalyst, 63% of Asian/Other women have attained college or advanced degrees, having the highest levels of education of all women managers. African American women managers have the next-highest level of attainment, at 40%, but they still earn less than their white managers. According to Women in Corporate Leadership: Progress and Prospects, a Catalyst survey of women senior managers, the average compensation for women of color senior managers is $229,000, compared to $250,000 for white women. The message is loud and clear: women of color are not worth as much to a company.

Boards Elections -- An Absence of Democracy

Currently, the nomination process is far from a democracy. If shareholders want to run a candidate for the board, they must print and distribute their own proxy materials, which is both expensive and time-consuming. Furthermore, at annual meetings investors have only two options when "voting" for the slate of board directors presented by the board. They can either vote for the candidates or not vote at all.

In a revolutionary move, the SEC published a report on July 15 regarding the election and nomination of directors, with an eye toward increasing shareholder rights in the selection process. The report recommends improved disclosure and improved shareholder access to the director nomination process. The details are still being worked out, but the changes are supported by SEC chairman William H. Donaldson, who has said "An effective proxy process has never been more important to restoring investor confidence. We have worked and continue to work with the markets to put in place listing standards and rules that increase both the role of independent directors and the voice of shareholders. The next step is to assure that the proxy process reinforces these important advances." The report states that the proposed rules should be ready by August or September.

What do these rules have to do with diversifying the board? Immediately, not very much. It will still take a large amount of shareholder organizing and clout to actually pass a board candidate, and even then there is no guarantee of election. However, the symbolism of the proposed rules is significant because it sends the message that shareholders actually have a voice at the highest level of the company.

What can be done? Minority Mentoring

In the study Women of Color in Corporate Management: Opportunities and Barriers Catalyst found that the number one barrier to advancement among its respondents was not having an influential mentor or sponsor. "Mentorship is critical to advancement. Seven out of ten women of color who had a mentor in 1998 have since had a promotion. What's more, Catalyst found that the more mentors a woman has, the faster she moves up the corporate ladder."

The Harvard Business Review also cites the importance of what mentors can do for protégés: By putting protégés in high-trust positions, mentors send a message to the rest of the organization that these people are high performers, thus helping them to gain confidence and establish their credibility. Also, mentors provide crucial career advice and counsel that prevents their protégés from getting sidetracked from the path to the executive level. Additionally, mentors often become powerful sponsors later in minority executives' careers, recruiting them repeatedly to new positions. Mentors often protect their protégés by confronting subordinates or peers who level unfair criticism, especially if it has racial undertones.

Boards need to actively seek women of color. The old argument that there are not enough qualified women of color to serve on boards of directors is simply untrue. Availability is not an issue, but rather an excuse, when the real problem is a lack of commitment to diversify. If boards are serious about diversifying their membership, there are many resources at their disposal. Corporations can work with multiple organizations with databases full of qualified women of color director candidates, including Catalyst, the Hispanic Association for Corporate Responsibility, and the Executive Leadership Council all of which have many names of outstanding board candidates.

Furthermore, as corporations come under increasing scrutiny in the wake of corporate governance scandals, director independence and innovation are becoming crucial assets to ethical corporate governance. It benefits boards to look beyond the executive model and to the outside world-such as academia, skilled professionals and entrepreneurship- for fresh perspectives on governance issues. By broadening the scope of potential candidates, boards open the possibility for more women of color to join their ranks.

The Bottom Line

The current situation of women of color at the board level begs the question: Can a company truly take diversity and its benefits seriously if it continues to be run at the highest levels by white men? In order to demonstrate a true commitment to the worth of diversity, corporations must set an example from the top. Only when the leadership is diverse will the workforce and the marketplace feel the effects. The cement ceiling will be broken, but only when diversity ceases to be just a buzz-word to appease critics.

By Kate Floyd, ICCR Intern
September 5, 2003