Changing Demographics in the Boardroom - NACD BoardVision
Board composition and renewal are hot topics that have investors and the public at large asking: “Who is in America’s boardrooms these days?” Catherine L. Bromilow, partner in PwC’s Center for Board Governance, and Jeannie H. Diefenderfer, founder and CEO of courageNpurpose and director at MRV Communications, discuss how directors can encourage dialog around composition and diversify the talent pipeline.
Henry Stoever: Hi, and welcome to NACD BoardVision. My name is Henry Stoever and I'm the Chief Marketing Officer for NACD. On this episode of BoardVision, I'm joined by Catherine Bromilow, a partner with PwC's Center for Board Governance, and by Jeannie Diefenderfer who is a director for MRV Communications, a publicly traded company. So in order to kick off the conversation today, Catherine, I'm wondering if you can kind of share with our viewers a little bit about what directors need to know, what they can do, and how they can take advantage of the rapidly changing environment in which we're operating in, specifically around board dynamics.
Catherine Bromilow: What we are seeing is a pretty significant shift in demographics, and with the millennial generation becoming far more influential and important, and the question, then, is with both the shift in demographics and the view among many, including many shareholders, of the importance and the growing importance and understanding of the importance of diversity and inclusion, a question on who is in America's boardrooms these days and really whether or not the diversity of thinking and of talent is around the table, but also whether there's diversity truly in terms of the gender and ethnic diversity. And so one of the things that we think will be happening will be that boards will have more pressure on their composition, particularly around renewal.
Henry Stoever: Jeannie, as a director on a publicly traded company, what are some of the implications for directors when you think about demographics in that board management interaction and relationship?
Jeannie Diefenderfer: I think additional focus or enhanced focus by the board. So these are issues, they've been around for a while, but I think what's happening with the shift in demographics is that the boards are now looking at the management and the way the management's running the business and saying not only is it more enhanced in the consumer base or the products they sell to the customers, but within the way they run their business, how they're maximizing the value provided by all kinds of diversity within the company whether or not it's gender, ethnic diversity, and additionally, experiential diversity as well as millennials. So all of these things come into play in a much stronger way, I think, than it ever did before. So the board, then, is responsible for asking the right questions to the management.
Henry Stoever: Catherine, what are your perspectives on what boards can be doing to accelerate the adoption of diversity of race, ethnicity, perspective, etc., into the boardroom?
Catherine Bromilow: I think there are some important steps that directors and particularly maybe nominating committees can take, but really all directors. One is to always be on the lookout for talent and, in effect, be talent scouts for the board. One of the things that we've known from some of our past surveys are that more than 90% of directors say that their number one source for new directors for their board are people in their own networks. So I think if directors deliberately try to expand their networks, get to know some younger people perhaps, younger executives, younger marketing people at various companies, start building those relationships, and then maybe even introduce them to the management team so that those younger executives, as they grow, become more of a known entity, then maybe boards are going to be a little more comfortable or that board would be more comfortable actually putting them on the board. So it's acting as a talent scout. It's also understanding and maybe being a little more forward-looking in terms of if do we want to -- if we want to improve diversity, does it mean that for a while we actually expand the size of our board by one or two directors to bring in perhaps some younger or otherwise diverse directors and give them a chance to learn.
Henry Stoever: Jeannie, going back to the executive board relationship with the board management relationships, some suggestions you think that you can provide for the management of the companies to really accelerate the growth of diversity within the company so that as Catherine's talent scouts are out there, she can find more and more of these diverse kind of leaders, so to speak.
Jeannie Diefenderfer: Yeah, and, you know, I think it's sort of a self-fulfilling prophecy. So there are lots of companies out there who actually do a lot of great work on increasing the pipeline to ensure that diversity is more prominent in the way they look at backfilling their positions or putting them in front of the boards. I think they can do actually more because sometimes I think they get shy about bringing that kind of detail to the board, and by getting the sort of the request or the welcoming feeling from the board that, you know what, they actually value this because they're looking out and they're looking at the shift in not only the customer base but in the competitive land and in globally what's going on in the world. They're actually are welcoming this kind of data, so I think management sometimes are a little bit gun-shy to present it, and a lot of them do have the data and they have a process in place. So I think sometimes it's just a matter of, you know what, putting it out there and not be shy to maybe get some push-back, you know, get some good questions from the board as to: Are you looking at this the right way, are you doing -- you know, are you looking at the right places when you want to get these kind of people on the board or on the management. I think it's all good, healthy dialog and debate.
Henry Stoever: Catherine and Jeannie, thank you so much. On behalf of NACD, PwC, and MRV Communications, this has been BoardVision. Have a great day.
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