Mellody Hobson Says the Time for Corporate Diversity Is Now

https://www.nytimes.com/2017/11/14/business/dealbook/mellody-hobson-corporate-diversity.html

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Mellody Hobson, president of Ariel Investments, says it’s time for corporate America to stop trying to create workplace diversity.

It’s time to start doing it.

“Trying is not the same as doing,” she said, noting that she wishes more chief executives would emulate the football player Colin Kaepernick, who repeatedly knelt during the national anthem to protest against social injustice, especially the deaths of African-American men at the hands of the police.

“I’ve never met Colin Kaepernick, but he’s a hero of mine,” Ms. Hobson said. “I’m in awe that he took it upon himself to publicly promote the American values of life and liberty that we all cherish.”

Looking out at the sea of executives attending the DealBook conference hosted by The New York Times last week, Ms. Hobson asked, “Where is the corporate Kaepernick?”

It’s a timely question. Only 6.4 percent of the chief executives of Fortune 500 companies are women, and only two are minorities: one Asian and one Hispanic. Of the four black chief executives, all are men. That number will drop to three when Kenneth Chenault, chairman and chief executive officer of American Express, retires next year.

“The fact that we’re in this situation is a real problem and it’s embarrassing for corporate America,” Mr. Chenault said, speaking at the DealBook conference.

It’s not just chief executives. The number of women filling Fortune 500 board seats declined by two percentage points between 2015 and 2016, according to Heidrick & Struggles Board Monitor; it is the first drop for women since the study began in 2009. Asian-Americans, blacks and Hispanics saw a rise over last year, but combined they still make up just 22 percent of incoming board members.

And according to Black Enterprise magazine, 197 of the top S&P 500 companies have no black directors.

This is despite studies, including an often-cited one by the consulting firm McKinsey & Company, that shows that companies with more diverse leadership teams perform better financially.

In an interview after her speech, Ms. Hobson said she thought the push for diversity was now “in limbo.”

“I think the Great Recession moved us backwards,” she said.

Not everyone agrees. Barry Diller, chairman and senior executive of Expedia and IAC, who attended the conference, points to his company and Coca-Cola, whose board he sits on, as firms that “have invested huge amounts in diversity.”

“Expedia has started a very aggressive push,” he said. “It’s not lip service or grandstanding. It’s not perfection, but I disagree there hasn’t been progress.”

Most who observe the trends are less sanguine and think the problem is not finding capable candidates, but hiring them.

“Despite the depressing numbers that we see out there, the reality is that there are incredibly qualified people who can move into those positions,” Mr. Chenault said. “But you’ve got to put them into the pipeline.”

So, to use Ms. Hobson’s analogy, what would “taking a knee” for diversity in corporate America look like? “Putting a stake in numbers,” she said. “Establishing benchmarks and making people accountable with incentives or penalties.”

Karen Kaplan, chief executive of the Hill Holliday advertising agency, who was at the conference, said she thought Ms. Hobson’s speech was “really, really powerful. And it was not lost on me that there were not very many people of color in that room.”

One point Ms. Hobson and others made repeatedly is that companies must be as intentional in promoting diversity as they are in promoting profits.

“We have to force behaviors,” said Laurence D. Fink, chairman and chief executive of BlackRock, the global investment management company. At BlackRock, compensation can be affected, he said, if certain diversity levels are not reached. Mr. Chenault, who was speaking on the same panel as Mr. Fink, said his company was doing the same.

If leadership does not aggressively pursue change in this area — not only in recruiting, but also in developing women and minority talent — then shareholders will, Mr. Fink warned, adding, “If we are not a mirror of who our clients are, we’re going to fail.”

But diversity is not colorblindness, Mr. Chenault said.

“When someone says to me, ‘When I look at you, Ken, I don’t see color,’ I say, ‘Then you’ve got a problem because I’m very proud about who I am. So, don’t deny I’m African-American. Accept me for who I am, engage with me, but don’t deny my heritage. That’s important because we don’t have enough honest discussions about race in this country.’”

Purposeful change also means reassessing longstanding assumptions and practices, said Dale E. Jones, president and chief executive of Diversified Search, an executive recruitment firm.

For example, he said, when boards of directors look to replace or add directors, they often narrowly focus their search on sitting chief executives, chief financial officers or chief operating officers.

“When the criteria are so restrictive, there are fewer people of color or women,” he added. “They need to look beyond the C-suite.”

Companies also have to push back when recruiters or their own hiring people fail to find a mixture of candidates. In her presentation, Ms. Hobson told the story of a friend of hers, a chief executive, who wanted to fill a high-level position with someone different from his all-white leadership team.

“His search team came back with three candidates — none were diverse,” she said. “They explained they just couldn’t find anyone.” So, she said, the chief executive said he simply wouldn’t fill the position.

“They found someone,” Ms. Hobson said.

Upacala Mapatuna, the chief investment officer with Victory Park Capital, a private equity firm, has seen the recruitment problem.

“We have attempted to ensure that our funnel of candidates include a number of women and minorities,” said Ms. Mapatuna, who was attending the conference, “and I’ve had discussions with a number of private equity firms that appear to be focused on this.”

Nonetheless, she added, too often when her company is presented with a slate of job candidates, “diverse applicants are few and far between.” One reason, she said, may be that “candidates are often identified through informal networks, which often tend to be homogeneous.”

Coming from the recruiting side, Mr. Jones noted that “you have to have multiple slates of females and minorities — not just one woman and one nonwhite for clients. We constantly have to re-educate the client about an expanded pool, which can include those who might not be in one of the top three positions in a company.”

One systemic way to promote more diversity, specifically on boards of directors, could be through staggered term limits of eight to 12 years, he added.

“Only 4 percent of boards in the Fortune 100 have term limits, and because of this, there will be slower movement of elder statesmen,” he said. “Most people get on boards in their 50s and they could have a 25-year run.”

Bonnie Gwin, vice chairwoman and co-managing partner of global C.E.O. and Board Practice at Heidrick & Struggles, said that in Britain, de facto term limits “didn’t add a lot of diversity.” Even so, “it seems to me intuitively it would be more opportunity to bring in diversity,” she said. “I think it’s one tool some companies can use.”

Deb Henretta, former global president of e-business at Procter & Gamble, sits on three public boards and has long followed this issue.

“It is discouraging to see the lack of progress,” she said. “It’s always scary to the majority that have more than their fair share of representation to give it up. But just because it’s scary, doesn’t mean it isn’t right.”