The focus on LGBTQ+ Board representation in the United States is at an all-time high as I have pointed out in previous articles. What has tackled inertia in this area by corporate America is the regulator whether it is through AB979 or the upcoming decision by SEC on the NASDAQ proposal as well as the rapidly changing societal attitudes towards LGBTQ+ people.
Our visionary LGBTQ+ board diversity initiative Quorum – a database of 900+ LGBTQ+ Board-ready candidates – finds itself in the center of this storm. In 2019, we expanded the Quorum initiative to Australia in partnership with the Australian Institute of Company Directors which was featured in our recent virtual Quorum Summit (February 2021).
But what is happening in other countries? After all European countries were the first to disrupt directors’ all-male networks and perform better on that aspect than the US, which has historically resisted quotas. Norway (in 2006), Denmark, Iceland, Spain and France (2011 – the famous Copé-Zimmermann law) were among the first countries to establish gender quotas on Boards. Rather successful: the boards of directors of the 120 main companies listed on the Paris Stock Exchange (SBF 120) now have an average of 46% women according to data collected by Ethics & Boards. In the UK, women now make up 33.5% of FTSE 100 board members. Why are they ignoring underrepresentation of other minorities?
A first explanation are bottlenecks in the global self-identification roll-out. Read this article on Self-ID by Google’s Jim Heighington and our own report Visibility Counts: Corporate Guidelines for LGBTQ+ Self-ID. Our report shows that LGBTQ+ Self-ID is lagging in many parts of the World. While it seems certain that LGBTQ+ representation lags behind due to discrimination in the workplace, we have no way to measure the extent of the problem among rank-and-file employees. We need to close this gap, but how do you close a gap that you haven’t measured and have not yet understood. In this context, LGBTQ+ representation on corporate boards, which certainly remains unexplored in the US, is almost a taboo.
A second explanation is that the informal networks that distribute Board seats are even more entrenched, opaque and elitist than in the US. In France, as an example, three schools ENA-Sciences po-Polytechnique produced 60% of all “administrateurs” (directors) in 2000 making Corporate Boards some sort of a secret society. This percentage has decreased substantially with the implementation of the Copé-Zimmermann law but this small conservative elite, which tends to only write the word “diversity” between quotes, continues to keep a tight grip on the corporate Governance system. Very often Boards are less about governance and more about a private circle of friends helping each other. That is never good news for minorities.
A third explanation is the diversity of governance regimes. In both France and Germany, a lot of administrators tend to be in-house rather than independent directors making the recruitment process of Directors dependent on who gets in the C-suite. Similarly, the German corporate governance system is a two-tiered board system distinguishing between the management board and the supervisory board.
A fourth explanation is the grave delays that companies are facing in addressing other dimensions of diversity such as ethnic or even gender disparities in some jurisdictions. Did you know that Germany only decided to require women on large firms’ boards last month? Women make up 12.8% of the management boards of the 30 largest German companies listed on the blue-chip Dax index as an example, which is …embarrassing. In Japan, the percentage of total director seats held by women in 2019 was 8.4%. A 2020 report by the Parker Review Committee ‘Ethnic Diversity: Enriching Business Leadership’, which explores the ethnic diversity of UK boards, reveals that, as of 31 December 2019, 37 percent of companies surveyed in the FTSE 100 and 69 percent of the FTSE 250 have not met the target of at least one ethnic minority director on their board.
And finally societal attitudes lagging behind. While approval of same-sex relationships in the United States cleared the 72% threshold, attitudes lag behind in many countries such as Korea where the approval rate is at 44% (see Pew Research, 2020) Ultimately, we know that directors, which tend to be older people, like to surround themselves with people from similar social backgrounds, with a similar education, to keeps the likelihood of conflict low and makes it pleasant to be together. The focus on trust and comfort exclude people which society deems untrustworthy.
Out Leadership is convinced that Quorum is a global initiative. Ultimately for Boards everywhere homogeneity is not only unfair, it is dangerous. We recommend that companies look at ways to measure and improve their LGBTQ+ board diversity as shareholder activism, societal expectations and ultimately the regulator will soon catch up outside of the US and Australia.