Black Presence on U.S. Boards Declines, Hedge Funds Cited by Some
African-Americans make up 8.6 percent of directors on the boards of the largest 200 companies by revenue in the S&P 500 in 2015, down from 9.6 percent in 2010, according to the annual Board Index study by Spencer Stuart, one of the largest executive search firms.
Earlier this year, Ronald Parker, CEO of The Executive Leadership Council, told CNN Money that the numbers are going south.
“Corporate boards, too, lack racial diversity and are overwhelmingly white. That needs to change, too, and boards need to be very, very intentional and methodical in succession planning,” said Parker.
Financial Advisor states that the reasons for the decline include the desire of boards to appoint members with particular qualifications such as cybersecurity expertise or a background in international business. Also, some African-American investors worry the increasing influence of activist hedge funds – where the presence of blacks is minimal – in appointing board members is partly to blame.
According to a study released last month by the National Association for Law Placement, there are only 1.8 percent of Black partners at big U.S. law firms. In fact, just 5.9 percent of U.S. college presidents were African-American in 2011, the most recent year studied by the American Council on Education. Although the numbers are low, the amount of African-American candidates is more than sufficient.
“Sometimes you have to remind them there are other people out there,” Kurt Schmoke, an African-American who is president of the University of Baltimore and a director of Legg Mason Inc. and McGraw Hill Financial, mentioned in Reuters.com.
According to a Reuters analysis of securities filings, company websites, and checks with individuals, among the ten campaigns against the largest companies that have gone to a shareholder vote since 2013 (identified by financial services group Houlihan Lokey), activists nominated 50 directors for board seats. And of that group, about 40 were white men and 6 were white women.
Reuters.com reported that there was just one African-American nominated, Lionel Nowell, part of the Starboard Value slate that won seats at Darden Restaurants last year. A former PepsiCo Inc. executive, Nowell is now a Darden director and is also a director at Bank of America Corp.
Parker told Financial Advisor that these trends mean companies need to look harder and “move beyond their normal circles to find talent who could serve as board members.”