By Isaac Mizrahi – Co-President of ALMA
One of the questions I often get about my experience as a multicultural marketing expert is what the most effective companies in this field have in common. When I answer that consistency is probably the main characteristic, some seem surprised because they think that the amount of investment is perhaps the defining factor for multicultural programs.
Don’t get me wrong; financial resources can be a huge help. Still, successful companies in the multicultural marketing space are ahead of their peers because they no longer waste time debating whether they should support minority segments or allocate a significant share of their budgets towards segments that represent the lion’s share of their current future growth.
These companies have developed some “mental muscle,” and this consistency starts at their leadership level. Seldom a multicultural marketing program lasts longer than a few years without solid support and championship from the whole C-suite and the company’s Board of Directors.
That may explain why so many companies are still lagging on such a significant consumer trend. On average, America’s boards of directors are still considerably behind when it comes to minority representation.
When the board of directors and senior leadership of an organization disconnect from the multicultural marketplace in this country, there may be risks of stagnant or negative growth and financial losses.
After all, less diverse boards and C-suites may not fully capture the game-changing demographic changes the country is experiencing and, most importantly, how these changes are impacting and will impact consumer behavior for years and decades to come.
A recent study sponsored commissioned by the Latino Corporate Directors Association (LCDA) called “Sounding the Alarm: Latino Board Trends 2010-2020″ shed some light on the challenge corporations face when it comes to diversity. (Full disclosure, I am a member of the LCDA).
Here are a few highlights of the study:
- While Hispanics represent almost 19% of the country’s population, they only hold 2% of the Russell 3,000 (R3K) company board seats.
- White Caucasian executives represent 87% of the R3K board seats (and 60% of the country’s population), Black directors represent 5% of the board seats (and 13% of the population), and Asian American directors represent 3% of the board seats (and 6% of the population)
- The situation is even worse when we consider the gender breakdown. Latinas represent only 1% of Fortune 500 companies’ board seats, the least of any gender or ethnic group.
I spoke with Esther Aguilera, President, and CEO of the LCDA, about the report and what is being done to address this challenge/opportunity. Below you’ll find an edited version of our conversation:
Isaac Mizrahi: What’s the most significant misconceived idea that justifies the lack of diversity in America’s Boards of Directors?
Esther Aguilera – First, no excuse justifies the lack of diversity in America’s corporate boardrooms. About 87% of Russell 3000 board seats are held by White Caucasians, and U.S. Latinos hold a mere 2.3% of these seats. Boards are dangerously disconnected from the new American marketplace and workforce. Latinos are two in ten Americans, and the Latino market share is growing 70% year-over-year. Plus, Latinos contribute 70% of new entrants to the workforce.
Our organization has written letters to every Fortune 1000 listed company with the business case and the talent case. There is ample Latino talent for the boardroom, with over 4,000 current or retired C-suite executives in public companies and many more in private companies.
We have engaged dozens of Board Chairs and Lead Independent Directors. We still hear the excuse that they can’t find Latinos qualified for their board roles. This is only one of the many misconceived reasons used.
Mizrahi: What are organizations like the LCDA doing to help change this situation?
Aguilera: LCDA is the only organization that prepares Latino individuals to potentially serve on boards and teach them how to make an impact. LCDA’s BoardReady Institute brings a comprehensive approach to preparing and positioning Latinos for the boardroom.
Mizrahi: Can having a more diverse Board of Directors directly impact the company’s performance?
Aguilera: A growing body of research connects business performance with diverse teams and decision-makers – you can search reports by McKinsey on this topic.
Mizrahi: Do you think investors may use the diversity (or lack of) of a Board as one of the criteria for investment recommendations in the future?
Aguilera: With boards dangerously disconnected from the customer and employee base, large institutional investors are advocating for boards to better reflect these stakeholders as a good governance and good business practice. Furthermore, Nasdaq and Goldman Sachs, as well as proxy advisors, including Institutional Shareholder Services (ISS) and Glass Lewis, have guidelines promoting board diversity and are engaging companies.
For many corporate executives, the multicultural business opportunity is almost a foreign concept because the multicultural consumer is “invisible” for some of them. It is time to make them “visible” again and make them present at all levels of a corporation’s structure, starting with the top seats, the Board of Directors’ seats.