CHICAGO & NEW YORK & SAN FRANCISCO & SYDNEY--(BUSINESS WIRE)--Despite recent reports that corporate America is walking away from diversity, equity, and inclusion (DEI), a survey of Fortune 500 board directors shows that the majority of the nation’s most influential companies continue to prioritize it. However, amid headwinds including the Supreme Court’s Affirmative Action ruling in higher education, new data shows a decline in:
- the number of directors of color recently appointed to boards;
- how often boards are focusing on race in operational and risk discussions;
- the amount of corporate capital committed to diversity initiatives; and
- how willing directors are to boldly champion DEI in the boardroom.
The second Black Corporate Directors Study, released today by global asset management firm Ariel Investments, LLC (“Ariel”), reveals how and why momentum has shifted on the topic of DEI in public company boardrooms. The study also compares these leaders’ sentiments to those of average employees.
Ariel co-founded the Black Corporate Directors Conference (“the conference”) in 2002 with Russell Reynolds Associates. Over two decades later, the event is held annually in partnership with Deloitte. The conference brings Black, Latino, and Latina Fortune 500 directors together to share best practices for promoting the civil rights agenda within their respective boardrooms. The convening also fosters a talent referral network for more minorities on boards. Ariel commissioned its second survey of corporate directors who attended the conference this past Fall, compared to the general population of U.S. workers.
Diverse representation on boards slows
While corporate boards have become more broadly racially/ethnically diverse over the past five years (20% in 2018 to 25% in 2023), The Conference Board / ESGAUGE datai shows that the percentage of Black (12%) and Latino (5%) directors has stagnated in S&P 500 companies. In fact, for a broader set of companies in the Russell 3000, these numbers have declined – Black directors decreased from 11% in 2018 to 8% in 2023, and the percentage of Latino or Hispanic directors decreased from 8% to 4% over the same period.
Consistently, the number of Black Corporate Directors Study respondents who view their boards as racially diverse (81%) declined by 9% since the inaugural 2021 study – suggesting that progress is slowing.
While more than half (58%) of directors surveyed reported their boards have added directors from a broad set of diverse backgrounds – these appointments are not exclusively focused on race/ethnicity.
DEI remains a primary agenda item in boardrooms, but with inadequate oversight and infrastructure
- DEI was added as a primary agenda item several years ago for the majority (59%) of the boards where respondents serve, while 28% added it as a priority within the last two years. Very few directors (2%) reported that it is not primary, an encouraging decline from 2021 (7%).
- However, over half (54%) of directors feel that among the wide range of diversity issues, race/ethnicity receives too little attention and is lower on the priority list in their boardrooms after other identities. Race follows gender identification, sexual orientation, and political affiliation in the pecking order. Still, these results show modest improvement from the 62% who felt it received too little attention in 2021.
- Conversely, nearly half (45%) of average workers feel there is an excessive emphasis on race and ethnicity—particularly white male workers (54%). In fact, this sentiment has increased since 2021.
Many board members surveyed still feel their companies struggle to operationalize DEI goals effectively—with stagnation or modest improvement from two years ago.
- More than a third (37%) do not believe that their board prepares organizational leaders for effective oversight of DEI through a structured onboarding and training process.
- Less than half (46%) feel that diverse board members oversee DEI through service on Nominating and Governance committees or other relevant committees – where the topic is often addressed in depth.
- Diverse directors are five percent less likely (55%) to say that their board is regularly overseeing the risks and opportunities related to potential impacts of their companies on communities of color.
- While three quarters (75%) of directors report that their companies are investing capital to support their racial equity and diversity goals, this statistic declined 7% from 2021. Of note, only 63% of this group report that the capital committed is sufficient to effectively fund DEI initiatives – down by 8% from 2021.
Leaders and workers do not agree on why companies prioritize DEI
Despite directors reporting that DEI is a primary agenda item for their boards and management teams, average workers do not believe it. In fact, only 42% of workers feel that DEI is very important to their company’s leadership, compared to 63% of directors.
When asked why DEI is a priority for their companies, the majority of directors surveyed noted a genuine care for the welfare of diverse employees (66%) as the leading reason. They also listed business imperatives like shareholder concerns (44%) and societal concerns like addressing social inequality (42%) as top drivers. Workers are far more skeptical, with less than half (46%) believing that their companies are prioritizing diverse employees. They also appear to view leaders as more focused on reputation, with public relations (43%) and political perception (27%) as leading responses.
Current affairs dampen directors’ willingness to champion DEI efforts in the boardroom
When it comes to taking a public stance on social justice or civil rights issues, today’s leaders are more cautious. Results show that 77% of diverse directors feel a responsibility to speak out—a 16% drop from 2021.
The Supreme Court's Affirmative Action decision in higher education has caused most directors surveyed (63%) to be pessimistic about DEI's progress in corporate America. Of that group, 29% believe that the ruling gives companies cover to be less committed to DEI.
However, when asked for commentary on how the ruling may impact corporate DEI activities, respondents’ sentiments were mixed, with phrases like: “Some [companies] will maintain their commitments and do more. Other corporations will use this as an opportunity to backtrack.”
Calls-to-action for Corporate America
The Black Corporate Directors Conference created an accountability framework for boards and leaders to meaningfully and credibly advance DEI in their institutions, entitled: “The Three Ps:” People, Purchasing, and Philanthropy. In response to this survey data, Ariel has provided updated guidelines, which can be found at the conclusion of the report.
Click here to read the full results of this year’s Black Corporate Directors Study.
Click here to read the results of the inaugural Black Corporate Directors Study.
Survey hosting and data collection occurred from August to October 2023 of 165 board members who attended the Black Corporate Directors Conference. Analysis and reporting was conducted by Helical Research, Inc. Helical also polled a national sample of 2,909 average U.S. workers employed full- or part-time across races for direct comparison.
About Ariel Investments, LLC
Headquartered in Chicago with offices in New York City, San Francisco, and Sydney, Ariel Investments, LLC is a global value-oriented asset management firm founded in 1983. Ariel serves individual and institutional investors through no-load mutual funds, collective investment trusts, private funds, and separate account strategies. The firm’s client-centric investment approach is rooted in four core values: Active Patience®, Independent Thinking, Focused Expertise, and Bold Teamwork. As of June 30, 2024, Ariel’s assets under management totaled $14.9 billion, including those from its private equity arm Ariel Alternatives. Ariel Alternatives’ inaugural fund Project Black® aims to scale sustainable minority-owned businesses to serve as leading vendors to Fortune 500 companies – supporting supply chain diversity. For more information, please visit www.arielinvestments.com.
i “How Board Diversity Can Contribute to Board Effectiveness” The Conference Board, November 2, 2023.
