July 7, 2021
Why Is Racial Diversity So Low on U.S. Tech Boards?
In the year since the murder of George Floyd and the racial justice protests that followed, bridging the racial equity gap on executive teams and boards business has become a key leadership conversation. Most observers agree that the status quo when it comes to diversity is simply not enough to make a measurable impact on attracting diverse talent and creating truly equitable and inclusive organizations.
Despite the attention to the issue, the addition of Black/African American and Latino/a directors on technology industry boards has lagged corporate America overall. Our 2020 U.S. Technology Spencer Stuart Board Index found that racial and ethnic diversity remains stubbornly low on tech industry boards. Only 3% of all board directors in the tech industry are Black/African American, and 1.5% are Latino/a — rates that run roughly one-third lower than the percentage found at the top 200 companies in the S&P 500. And among the 172 new tech board directors added in 2020, only five are Black/African American and five are Latino/a, collectively representing just 6% of all new directors. Meanwhile, Asian directors account for 10.1% of tech directors, well above the S&P 500 level of 6%, and 13.4% of new directors in 2020 were Asians.
The 2020 index covers the year ending June 30, 2020, so it likely reflects few if any actions boards took in the wake of the political and racial strife that occurred in the wake of George Floyd’s death.
Technology boards have made progress in recent years increasing gender diversity. Ninety-six percent of tech boards in 2020 had at least one woman on the board, up from 72% in 2014; women now represent 24% of directors on technology boards, continuing a steady increase from 17% in 2017.
Our 2021 technology board index, to be released in the fall, will offer a more thorough snapshot of how technology company boards have responded to the calls for increased board diversity.
Reasons for optimism
The challenges, however, point to some reasons for optimism that tech board will increase their racial and ethnic diversity. Among S&P 500 boards, we saw a sizable increase in the recruitment of Black/African American directors and a smaller, but notable increase in the recruitment of Latino/a directors.
Some factors and some steps by boards could help drive increased board diversity in the tech industry.
- Increasing investor and regulatory pressure. Investor pressure has played an important role in the push for gender diversity, and investors are also demanding more board oversight on workforce diversity. As more investors — and directors — see diversity as a business imperative, the pressure will also rise for greater racial/ethnic diversity in the boardroom. Meanwhile, regulatory pressure has factored into the increase in women on tech boards; laws such as the one in California requiring a certain number of female board members have compelled companies to add women to the board. Legislative pressure could be a factor in increasing the ethnic/racial diversity of boards in the coming years.
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Increasing public pressure. At the same time that regulators increase their scrutiny, issues like systemic racism and diversity are generating more discussion in the court of public opinion. As the topic remains top of mind among consumers and in the media, tech boards may need to do some soul searching, even if regulators remain out of the discussion.
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Non-CEOs on boards. The typical targets for board searches — CEOs and CFOs — are the positions with the least diversity in the C-suite, according to our research. Furthermore, many CEOs and CFOs are maxed out in terms of how many directorships they can take. As this forces boards to look to other C-level positions for new board directors, they may find many willing and qualified candidates for their boards. They may also find value in adding “the customer voice” to tech boards, by adding top executives from industries like retail, healthcare, industrial and other major GDP segments where there are big technology budgets and greater diversity than tech.
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Younger generations. The youngest members of the workforce today, Gen Z and millennials, are much more socially active and diverse. As they continue to replace the old guard in leadership roles, there is good reason to believe that their drive for diversity will similarly trickle upward to increasing racial/ethnic representation on boards.
Conclusion
By thinking more creatively about who can add value to a board, especially outside of an organization’s direct area of domain expertise, companies are already finding valuable board members, and more can be done here. At the other end of the spectrum, hands-on, proactive work increasing diversity throughout the pipeline down to the entry level can have a long-lasting effect on board composition. Combine this with rising pressure from governments and consumers, and there’s reason to think that the optimism above could point to increased diversity on tech boards. In the meantime, we eagerly look forward to seeing the data in our next U.S. Technology Spencer Stuart Board Index in the fall of 2021 and finding out what progress may have been made in the past year.