Systemic obstacles at the senior management level could be contributing to the persistent lack of diversity and inclusion on corporate boards in America.
A recent New York Times article described the experience of Niki Christoff, a Salesforce executive who was barred from accepting a board role – and ended up shedding light on a hidden obstacle to board diversity. When Christoff sought permission from CEO Marc Benioff to join the board of a public company, he refused, citing a company policy stipulating that only his direct reports could serve on for-profit boards. Christoff ultimately joined the board, and was fired from Salesforce.
Salesforce’s policy is not outwardly discriminatory, but as Christoff told the company’s general counsel, “given how few women and people of color report directly to Marc, there’s a disparate impact on those groups.” The policy is also not uncommon. Many American companies have similar restrictions, particularly in the technology sector. The trouble is, if board membership is reserved only for the most senior executives, and those ranks lack diversity themselves, then very little diversity will trickle into the nation’s boardrooms.
Meanwhile the pressure is on for companies to take action on diversity and inclusion, both on their boards and their senior management teams. The benefits are well documented, and the calls are coming from all sides – investors, the public, business leaders and regulators. Yet a look at board composition shows the numbers remain low: At the largest listed companies in the U.S., women account for just under 30% of board directors, while ethnic and racial minorities comprise about 20%.
Companies argue that outside boards distract employees from their primary responsibilities, and the time commitment can certainly be substantial. There is also the possibility of conflicts of interest and reputational risk. “This isn’t easy,” said Benioff. “All 57,000 Salesforce employees cannot join the boards of other companies at their will – it’s too much risk and complex for a company of our size and scale.”
As companies seek to diversify their board composition, invitations are being extended to a wider range of employees. This trend will likely only grow. Some argue that serving as board directors on outside boards can enrich employees and widen their perspectives. This enables them to bring new insights to their jobs and can improve performance. The rewards could outweigh the risks. Benioff added, “I might have this wrong. We are continuing to evaluate our policy.”