Corporate Diversity in the Boardroom Comes into Focus

High-powered African American executives and scholars consider boardroom diversity's proven benefits as Obama's candidacy changes the national dynamic

In a period of crisis, what if we were handed a proven method of problem solving? What if mathematical equations paved the way to a better result—a more tenable Congressional bill or a better way for corporations to sell widgets? According to University of Michigan professor Scott E. Page, there is such a panacea: When people in Congress, a corporate boardroom, or virtually anywhere else are faced with solving a problem or making a prediction, a diverse group is more likely to yield a superior outcome. Using mathematical models similar to those used to predict the movements of financial markets and voting patterns, Page demonstrates how difference beats out homogeneity. "I'm not making political statements, he says. "These are mathematical results."

Such analysis is music to the ears of many high-powered African American executives. Consider the response from a group of some 120 African Americans who serve as directors of publicly traded companies. Each year, Ariel Investments, a Chicago-based money management firm, and executive recruiter Russell Reynolds Associates, sponsor a gathering of prominent African Americans who serve as corporate directors. As Page, who is white, laid out his argument Sept. 6 to this group during the annual Black Corporate Directors Conference in Laguna Beach, Calif., several in the audience smiled and even cheered. "It made the conference that much more powerful," says Charles A. Tribbett, managing director for the Chicago office of Russell Reynolds .

In the Age of Obama, when a black man has become a viable candidate for President, executives are looking for ways to create a corporate world that is just as open and inclusive as the political arena. In addition to the conference's black directors, several of the nation's most powerful white executives were present to discuss the value of diversity in the boardroom, including General Electric (GE) Chief Executive Officer Jeffrey Immelt, McDonald's (MCD) Chairman Andrew McKenna, and DreamWorks Animation (SKG) Executive Chairman Roger Enrico.

Struggle Over Race

For them, diversity isn't a topic to avoid. And their presence suggested that the conference, now in its seventh year, has developed its own cachet. "We had a sort of budding reputation the last few years," says Mellody Hobson, Ariel's president. "Now there is clear energy around Barack Obama and clear energy around race issues being more on the front burner."

No doubt, Corporate America continues to struggle with the topic of race. The vast majority of the nation's publicly traded companies continue to be led by a rather homogenous group of graying white men. At the country's 100 largest corporations, African American's occupy only 9% of the board slots, yet they represent nearly 13% of the U.S. population and nearly 12% of the labor force. Another sobering fact: Black board representation is about the same as it was two years ago and might even be trending slightly downward, according to officials at The Executive Leadership Council, a nonprofit organization of black executives devoted to broadening black leadership.

Women and all minorities represented just 14.8% of the top 500 company board seats in 2007—again, essentially the same percentage as in 2005, according to researcher Catalyst Inc. And yet, "There is a flat-out, bottom-line, pragmatic reason to have greater representation of blacks [and other people of color] on boards," says Professor Page. "That is due to differences in the way they think that comes from their different life experiences."

For the executives in attendance at the conference, the key was not simply to plot strategies for increasing the number of people of color and women on boards. The real point was to help African American directors and their white colleagues learn how to get the greatest value from a diverse boardroom. Immelt, Enrico, and others engaged in "fireside chats" with moderator Soledad O'Brien of CNN.

Leaving "Comfort Zones"

The dialogue was characterized by frank talk about how black and white directors can better interact and how companies can best utilize the expertise and referrals possessed by black directors. In his chat Immelt discussed efforts underway at GE to replace some of the African American executives the company had lost and how he encourages employees to break outside their comfort zone in relating to colleagues and business partners. The discussion was symbolic of the conference's value. "If you want to be an effective director it's good to sit down with others, and not just those of your own ethnicity but other ethnicities and share," says William H. Gray, III, chairman of the Amani Group, an advisor to government, educational, and business institutions, and a former U.S. Congressman.

One delicate area that many African American (and white) board members wrestle with is whether African Americans should be the go-to directors for "black" issues. These highly accomplished African Americans would not be on a board if they did not have considerable business expertise. But many argue that boards miss opportunities by not taking advantage of a black board member's understanding of the advantages that diversity offers, including new suppliers, underutilized financial and legal services, and a reservoir of untapped talent.

Political Perspective

The conclusion at the conference was that sometimes for black directors it's as simple as raising a hand to put the topic on the agenda. "We can use our influence as directors to ask questions of boards, auditors and banks," says Ariel CEO John Rogers, who along with Russell Reynolds' Tribbett originally conceived of the conference. "It will force them to move people onto payrolls and increase the pipeline" of black directors and executives.

To add perspective, the directors heard from political leaders who have long struggled with sensitive race issues. Former Senator Bill Bradley shared his experiences in representing a constituency that was black and white. So did Congressman James Clyburn. And Valerie Jarrett, senior advisor to Barack Obama, explained that it was no accident that Sen. Obama focused on winning Iowa early in the Democratic primary. His strategy to put time and energy into Iowa caucuses was aimed at "sending a strong signal that, 'Yes, I am a credible candidate,'" Jarrett said. Obama's early primary victories in majority-white states helped prove his viability as a candidate and allowed him the freedom to speak more credibly to issues affecting whites and blacks. As a result, "he has changed the whole dialogue" to a theme of inclusion and connecting with people.

America's boardrooms don't yet mirror the hallways of Capitol Hill. The topic of race is often avoided due to worries about being politically correct. But whether in Congress or Corporate America, Professor Page reminds us what leads to a better result: A diverse group of 12 reach more fruitful decisions than a homogeneous gathering.