Developing the next generation of innovators and entrepreneurs

Diversity in Business Leadership

Jul 22, 2020 | Business, Equity | 0 comments

The World Academy for Innovation and Entrepreneurship (WAIE) is a strong believer in the fact that it is time for us to build our own tables instead of asking for a seat at someone else’s table. Creating diversity in business leadership is essential to supporting communities of color in developing generational wealth.

As of 2018, 5% of CEOs in the USA are African American and 19% are LatinX. However, 76% of CEOs are composed of either Asian/Indian or European American. Furthermore, if we dive further and look at the makeup of the board of directors for companies in the United States then roughly 15% of board seats in major companies are held by people of color. In order to change this we must support the next generation of entrepreneurs in building businesses and recruiting diverse boards so that we can grow together as a community.

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Despite comprising a smaller share of the U.S. population than African Americans or Hispanics, the most represented racial minority at the CEO level of U.S. companies was Asians/Indians, who comprised 30 percent of CEO positions at Fortune 500 and S&P 500 companies in 2018. By comparison, five percent of CEOs at the time were African American.

E. Mazareanu, Statista

Diversity in Business Leadership: Chief Executive Officers (CEOs)

True representation cannot be made in corporations until it is reflected at the top of the organization. However, corporate America has a long way to go before they truly reach a level of diversity that is reflective of the population of the United States in both gender and ethnicity. Diversity at all levels of the workplace helps companies to better innovate and compete in the marketplace as US demographics and consumer habits change.

The data that does exists on diversity is dismal and could be even worse since companies aren’t required to report on the ethnicity of their C-Suite or board of directors. However, if they had a diverse makeup then they more than likely would not hide that fact from their consumers. Black professionals may compose 5% of all CEO positions in 2018 and now are at less than 2.5% in 2020, but when you look at the C-Suite in its entirety, they make up 3.3% of leaders in companies that report. The C-Suite are individuals who are within two reporting levels of the CEO. 

As a community we have two choices. First, we can either keep hoping that change will be made and we’ll be invited to have a seat at their table. Or, two, we can help the next generation of children of color build their own companies so that they are properly represented in the business world as leaders and creators of employment and wealth.

Diversity in Business Leadership: Board of Directors

The next most powerful role at a company is the board of directors. Even within the board of directors the lack of diversity is great and concerning. The board of directors not only serve as the governing body of a company but they also hire and fire the Chief Executive Officer (CEO).

That being said, a board that is representative of only one population and at times only one gender, may be less likely to hire individuals for the CEO role that don’t fit their preconceived views of what a CEO consists of in corporate America. This creates a system of oppression as the promotion process can also exclude qualified Black candidates, who may not be a part of the social networks that board members and CEOs often use to vet candidates for the role. This is why diversity in business leadership is extremely important.

In a 2018 report produced about Fortune 100 companies, 5.8% of board seats were held by women of color and 13.7% of board seats were held by men of color. This is compared to 19.1% of board seats being held by European American women and 61.4% of board seats being held by European American men. If we dive deeper into those board seat numbers then the ethnic breakdown of Fortune 100 board seats for 2018 consists of:

  • 3.8% – Asian/Pacific Islander
  • 4.4% – Hispanic/LatinX
  • 11.1% – African American/Black
  • 80% – European American
  • 0.2% – Other

Within those same findings they examine the Fortune 500 companies. One would think this would provide better representation since it includes 500 companies instead of 100 companies. However, this is not the case. 4.6% of board seats were held by women of color and 11.5% of board seats were held by men of color. This is compared to 17.9% of board seats being held by European American women and 66.0% of board seats being held by European American men. When you break it down by each ethnic category you have the following results:

  • 3.7% – Asian/Pacific Islander
  • 3.8% – Hispanic/LatinX
  • 8.6% – African American/Black
  • 83.9% – European American
  • 0.1% – Other

With that being said, there is a group who is working towards increasing the diversity in business leadership at a board of directors level. The Alliance for Board Diversity has the mission to support board rooms to reflect corporate America. However, we can’t rely on only one initiative to change the representation of people of color when it comes to the bargaining power of corporate America and the investments business leaders can make in their community.

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