Banking companies will not maximize their profits if they don't add women and minorities to their boards at a quicker pace.
An increasing number of advocates are making this argument, saying women and minorities offer a worldview that could help banks and other corporations do a better job of leveraging a diverse client base and tackling the new regulatory environment.
Shirley Davis, the director of diversity initiatives for the Society for Human Resource Management, made that point clear during a speech last week at a diversity conference in Greensboro, N.C. Diversity in hiring, she told attendees, helps businesses "develop products and services for a diverse customer base." Davis said, however, that only 30% of all organizations have a formal definition for diversity.
Women and minorities have a higher profile than ever before, but observers said that their presence still significantly lags that of white males. Current trends indicate that progress will be slow, which in turn could lead to missed opportunities as the economy emerges from the recession.
"Having a diverse perspective on a board is very healthy," said Bonnie Gwin, a managing partner for North America in the board of directors practice at Heidrick & Struggles. The executive search firm on Wednesday released a survey in conjunction with Women Corporate Directors looking at gender-based perspectives on corporate boards in various industries.
Gwin noted that the level of diversity on boards has remained "pretty static" over the past five years, with small gains rather than big leaps forward. "It's a little surprising because of the focus on bringing diversity into the boardroom," she said.
Among the 15 biggest banking companies, women held just 16% of board seats as of last year's proxy season, according to regulatory filings. Members of minority groups made up just 13.7% of the directorships at those companies.
There are many reasons why progress is slow, observers said.
Susan Bies, a former Federal Reserve Board governor who joined the board at Bank of America Corp. last year, said a huge hurdle involves finding candidates with executive experience. "Bank boards pull from all kinds of industries, and they want people with experience in the broad aspects of running a major company," she said. "Until corporate America gets to a point where women and minorities rise to the upper echelon of management, then the pool of director candidates will be thinner."
Kay Coles James, a director at PNC Financial Services Group Inc., said another challenge involves educating women and minorities on how to develop the relationships needed to get noticed by nominating committees. "I get asked frequently by African-American leaders about how to get elected to the board," she said.
"For many of them, it is a mysterious process, and they don't know how to access it," added James, who is also the founder and president of The Gloucester Institute, a nonprofit in Virginia that coaches members of the black community on leadership skills.
Gwin said more work is being done to help with education. Women Corporate Directors, a New York association devoted to promoting more female directors, has 27 chapters in the United States and abroad. "This is a grassroots group that is gaining steam," she said.
Steven Reinemund, the dean of the Wake Forest University Schools of Business in Winston-Salem, N.C., warned during a panel discussion at the diversity conference that those who overlook diversity could miss out on opportunities for profit in a tight economy. "I believe that the companies that keep their commitment to diversity are going to have an economic advantage when the economy turns around," said Reinemund, who was chairman and chief executive at PepsiCo Inc.
Diversity could benefit banking companies in particular, some said. One bank director, who asked not to be named, said that women and minorities could offer better guidance in the area of discriminatory lending.
"They've been through that treatment applying for small business loans," the source said. "You'll find that many directors, because of personal experience, will see this as a chance to clean up practices."
The survey from Heidrick & Struggles and Women Corporate Directors also offered more insight where women's and men's opinions on management differ.
For instance, 90% of female respondents believed that women bring "special attributes" to a board, compared with 56% among male participants.
Just as telling, 40% of female respondents believed that enhanced risk-management systems would help rebuild public trust in corporate boards, compared with only 1% among men.
When asked about the need for new regulations on compensation, 45% of female respondents supported such regulations, compared with 22% of the male respondents.
There was also resistance to mandating quotas to promote diversity, even as European nations consider the concept. About 25% of women — and 1% of men — agreed that quotas should be implemented in the United States.
Bies, of B of A, said quotas could actually be harmful. "If I was on a board and thought I was a token to get to the right ratio … I would feel marginalized," she said. "I don't think it would be healthy."
James, of PNC, agreed, adding that she is seeing more interest than ever before on the part of boards to be more inclusive. "One problem is that boards are notoriously old, and directors stay on for a while," she said, providing limited opportunities. "The process is going to take time and patience, but I am confident about the future."
"Boards want fresh perspectives and new thinking," Gwin, of Heidrick & Struggles, added. "There is a genuine desire present, so I think we'll get there."