CHAMPAIGN, Ill. — A new report from a team of University of Illinois Urbana-Champaign labor experts shows women and nonwhite minorities remain largely underrepresented as corporate board members in the state of Illinois relative to the state’s demographics and their respective industries. The report also highlights several promising policies and practices that firms can adopt to help improve the disparity.
Labor and employment relations professors Richard A. Benton and Eunmi Mun calculate that 67% of Illinois corporations have two or more female directors while only 35% have two or more nonwhite directors.
In an analysis based on 74 registered corporations that filed a 2020 Female and Minority Directors Report with the Illinois Secretary of State, the researchers found that Black and Hispanic directors were particularly underrepresented, but all nonwhite groups were underrepresented at most firms.
Despite gains, women’s board representation still falls short of their overall representation in the workforce in Illinois, according to the report.
Although a small number of firms lead the way in board diversity, there is still wide variation as many firms maintain unrepresentative corporate boards, the researchers said.
“A handful of companies are doing well in board member diversity, but we found that women and most racial and ethnic minority groups aren’t equally represented proportional to their representation in the state,” Mun said.
“There’s a long way to go in terms of board diversity, representation and inclusion for women and people of color, but we can point to a number of policies and practices that are promising and important for organizations to consider if they want to change their board-appointment practices,” Benton said.
The report is the product of a 2019 Illinois law that tasked the researchers with assessing the status of diversity and inclusion on the boards of public corporations headquartered in the state. The law requires a public corporation with its principal executive office located in Illinois to report to the Secretary of State information about the gender and racial/ethnic composition of board members.
Some companies have strong board diversity policies but quite a few had no policies at all. And the companies that didn’t have a board diversity policy didn’t have any women or minority board members, the researchers said.
“A lot of companies would just point to their existing equal employment opportunity policy or their existing nondiscrimination policy that applies to the workforce in general,” Benton said. “Those kinds of policies and practices are suitable for filling most employment vacancies, but they are decidedly less suitable for board appointments. The process of filling a corporate board is very different from the process of hiring rank-and-file employees in an organization.
“So step one would be to actually have a policy on board diversity.”
“Similarly, many companies would talk abstractly about how they value diversity, but they couldn’t point to a specific policy or practice that they use to try to promote those values,” Mun said. “It’s great to say you value diversity, but those values have to inform your practices.”
And firms need to turn practices and policies into actual process, the researchers said.
“It’s important to celebrate values, it’s important to have a policy – but it can’t be a policy that sits on the books and doesn’t get implemented in a substantive way,” Benton said. “One concrete way to operationalize that is companies being more proactive in directing executive search firms to consider a diverse slate of candidates for board and higher-level executive positions.”
Companies also need to consider how a lack of board diversity affects the top-to-bottom culture of the organization, the scholars said.
“There’s a temptation to just think about this as an issue of board diversity and top leadership – how to get members of underrepresented groups into these positions. But companies need to think about creating a pipeline of diverse talent throughout the organization,” Benton said. “Historically, that’s been a barrier that people in the business community point to. You often hear complaints about how it’s hard to find qualified people from underrepresented groups to match to open corporate board positions. But they can’t just think about the end goal. They need to ensure that there are going to be people developing the necessary skills to advance their careers so they can end up in these executive and senior roles.
“So thinking about what firms are doing to cultivate diversity at every level of an organization, and not just to meet this top leadership target, but throughout the layers of the organization, is important, too.”
In addition to shining a light on underrepresentation, benchmarking the board diversity practices of leading firms may “encourage firms to take a look at what other companies are doing,” Benton said.
“There’s no formal way for firms to learn about board diversity, so they can learn from their peers – and they may be actually quite surprised at how widely policies vary among their peers,” Mun said. “The bottom line is that improving gender and racial and ethnic representation among corporate leaders and boards of directors ought to become an important goal for firms, shareholders and other stakeholders.”