The ol’ boys club of corporate leadership so poignantly portrayed by “Mad Men” should end at the same time as the TV show. In the place of corporate boards who undervalued women, LGBT people and minorities, there is now a growing sentiment that a diverse board of directors is essential for business. Times have changed. Shareholders and consumers should tell corporate boards that they need to act now to diversify their leadership. Corporate directors shouldn’t wait for declining bottom lines and shareholder discontent.
Corporations wishing to remain competitive in today’s global economy must be able to draw on diverse experiences and perspectives reflecting a changing marketplace. Boards that include a wide range of skills and experiences are better positioned to oversee company strategy, risk mitigation and profitability. Leadership diversity also improves employee morale and productivity and sends a message about who can advance.
In 2008, I asked officials at both of the state’s pension systems to consider new ways to promote corporate board diversity. Both responded, and in a few years, the notion of board diversity became mainstream. In 2014, the chairpersons and CEOs of 27 companies (including Warren Buffett) launched a group to promote corporate gender balance.
Despite this growing support, a long struggle remains ahead. A 2008 study found only 28 percent of Fortune 100 board seats were held by women and minorities. Four years later, that number improved by only four percentage points.
Recently, I challenged our pension funds to expand their definitions of diversity to include lesbian, gay, bisexual and transgender individuals, and to redouble their efforts on two significant obstacles. The first is a lack of vacant board seats and turnover. We need “proxy access,” an industry term for allowing board nominations from outside the boardroom. This gives shareholders a more direct role in the selection of company leadership.
One troubling example is McDonald’s, with its underpaid workforce and five consecutive quarters of declining sales. McDonald’s board members serve 55 percent longer than the S&P 500 market average, and most come from the company’s hometown, yet McDonald’s opposes direct board nominations from shareholders. This is a backward approach for a company struggling to keep up with competition that is more attuned to today’s consumers.
The second obstacle is a lack of visible, qualified candidates from different backgrounds. I will work with our pension funds to find ways to make more candidates visible, either by improving an existing candidate database or developing networking opportunities that reach outside the normal cast of characters.
Don Draper, the central character in “Mad Men,” revels in behavior that would be considered unthinkable in today’s workplace. Thankfully, Draper and his open contempt for women and minorities are largely relics of the past. But while the overt sexism and bigotry of the 1960s is no longer tolerated, many corporations hang on to that era’s notion of who is best able to serve in leadership posts.
Now is the time to push for the day when a business executive — such as Draper — asks, “What do women want?” and the reply won’t be, “Who cares?”
State Treasurer John Chiang’s op-ed about the need to increase corporate board diversity appeared this week in the San Francisco Chronicle
