Even with growing investor pressure to recast overwhelmingly white boards of directors, nearly two-thirds of the nation’s 3,000 largest publicly traded companies lack a Black board member, according to new data analyzed by BoardProspects.
The data, shared exclusively with USA TODAY, shows that 60% of the Russell 3000 index, which includes most publicly-traded companies on major U.S. stock exchanges, do not have a Black director including Amazon.com, GoDaddy, Jack in the Box, Molson Coors Brewing and Western Union.
Of the nearly 27,000 board members in the Russell 3000, only 5.4% – 1,467 – are Black, underscoring the slow progress in overcoming historical patterns of racial inequity at the top of corporate America.
But, the data also shows that corporations hit an “inflection point” in the latter half of 2020, spurred by the national uprising over last year’s police killing of George Floyd, said Mark Rogers, CEO of BoardProspects, a digital platform that helps companies find board candidates.
Black board members accounted for 18.5% of all new board appointments to Russell 3000 companies following Floyd’s death.
Of the more than 420 new Black director appointments between 2019 and 2020, 62% occurred in the seven months after he died.
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“Clearly corporate boards still have a long way to go in terms of achieving racial diversity, but we’ve seen some remarkable improvements just over the past year,” Rogers said in a statement.
Between 2019 and 2020, 4,145 new board members were appointed to Russell 3000 companies, 422 of whom were Black, or 10.1%.
According to the BoardProspects analysis, 114 of the 1,945 board members appointed to Russell 3000 companies in 2019 were Black, 58 men and 56 women. In 2020, 308 out of 2,200 board members appointed were Black, 170 men and 138 women.
Some industries added more Black board members than others in that period. Banking added the most – 22 – followed by biotechnology and internet companies with 17. Laggards were the specialty retail, software, health care provision and food products industries, with 11 each, Rogers said.
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Corporations have pledged for years to increase the number of Black, Hispanic and other members from underrepresented groups on their boards of directors. In recent months, investors and activists have turned up the pressure on corporations to make good on their vows to tackle racial injustice and to better reflect their customers and the U.S. population.
BlackRock, the world’s largest investment manager, is calling on directors to push for more diversity in their own ranks and says it will vote against those who don’t.
State Street Global Advisors, which manages about $3 trillion, said it will vote against corporate directors in key positions who do not disclose the racial and ethnic composition of their board and belong to boards that do not have at least one member from an underrepresented group.
In December, Nasdaq proposed a new rule that would require all companies listed on the exchange to have, or explain why they don’t have, at least one women board member and one board member who is non-white or who self-identifies as lesbian, gay, bisexual, transgender or queer.
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Lawmakers are also getting involved. Last year, California passed a law requiring publicly traded corporations headquartered in the state to appoint directors from underrepresented communities to their boards.
It was inspired by a 2018 law that requires publicly held corporations headquartered in the state to add women to all-male boards. Both laws have faced legal challenges from conservative groups.
Studies link boardroom diversity to financial performance
Studies have linked board diversity with better financial performance and returns for investors.
Yet little more than a third of directors said racial and ethnic diversity is very important to have on their board and less than half of directors said gender diversity is very important, a PricewaterhouseCoopers survey of board members found.
The spotlight on board members reflects the power and profile of their role. They hire the CEO, decide how much to pay top executives and oversee the direction and strategy of a corporation.
Leading business and diversity scholars also warn against placing too much stock in Black representation on boards, which they say is too often window dressing to conceal the lack of diversity in the executive suite.
A 2020 investigation by USA TODAY found that less than 2% of top executives at the nation’s 50 largest companies are Black.
At the time, John W. Rogers Jr., founder and CEO of Ariel Investments who sits on the boards of directors of Nike and McDonald’s, told USA TODAY he has heard this kind of talk before. Companies say they want to be less white at the very top but don’t follow through to make it happen.
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So what is he supposed to do as a Black businessman who has served as a member of several companies’ boardrooms?
“What I’ve learned is if I’m on a board and they’re not interested in fairness and true economic inclusion, then I will resign from that board,” Rogers said. He declined to name the companies he’s left. “I’ve done that several times over the years, where this is not a good fit, and these people are not living the values they say they believe in.”
Contributing: Brent Schrotenboer