Advocates for corporate diversity and inclusion are hailing a first-ever report on the demographic composition of boards of directors for some companies headquartered in Illinois as a “gold mine” of data and a “game changer.”
The report found that women and non-white directors are largely underrepresented, much as they are in other states that track similar data. It also highlighted that some approaches appear to be more strongly correlated with diverse and inclusive boards than others.
“I think I’m encouraged to see that Illinois doesn’t seem to be far behind other peer states,” said Richard Benton, assistant professor at the University of Illinois’s School of Labor & Employment Relations. “But what that means is that there’s also a long way to go if we want to advance the cause of better representation on corporate boards.”
Benton and colleague Eunmi Mun analyzed the data submitted by 74 corporations to the Illinois Secretary of State, which is responsible for collecting the annual filings. They found that two-thirds of those companies had two or more women directors, and that across the sample, women represented 21% of the average board’s total membership. While this meets an external benchmark set by the 2020 Women on Boards Gender Diversity Index, it still falls far short of the representation of women in Illinois’s workforce and population.
Companies fared more poorly, however, when it came to racial and ethnic diversity on their boards. The analysis found that only 35% of companies had two or more non-white directors, and that across companies non-whites comprised only 15% of board membership. Asian, Black and Latino membership to boards lagged behind those groups’ respective workforce shares across industries.
“The fact that we did not see representation that even comes close to workforce representation is not a surprise,” said Gloria Castillo, formerly the president and CEO of Chicago United, a group that works to advance multiracial leadership in business. “We know that the increase of representation for Black and Latinx, in particular, has been glacially slow.”
The analysis found the representation gap to be largest within the Latinx community. Among companies that submitted data, 83% had zero Latinx directors. Overall, Latinx directors comprise only 2% of total board membership.
Castillo says this is due, in part, to the fact that companies tend to recruit CEOs and CFOs to their boards. In general, Latinx individuals are absent from that pool. That, in turn, may be due to a lack of cultural fluency on the part of company executives who may not be familiar with values within many Latinx cultures, Castillo said.
“We tend to be very collaborative. … We are very community oriented. And so we tend to want to lift together. There are other cultures that are much more individualistic, where they want to be seen individually for their success,” said Castillo. “That becomes a challenge when it comes time to promote. Because if you see someone who doesn’t look to you like they are driving hard individually, you may not appreciate how well they are bringing along an entire team and making an entire team really successful.”
By state law, each year, publicly-traded corporations headquartered in Illinois are required to submit the information, and the University of Illinois is required to produce a report summarizing its findings from the filings.
Illinois was far from the first state to enact legislation aimed at enhancing board diversity. When it enacted the statute in 2019, it joined states such as California, New York, Colorado and Maryland. Advocates say there is a social justice case for encouraging companies to reflect the makeup of their workforce in the boardroom, as well as a business case.
“In corporate governance research, there’s a lot of evidence that more diverse boards are better governed, take fewer risks, incorporate more and better information and are more strategically sound,” said Benton.
Benton and Mun also found that companies that could describe specific strategies to recruit diverse board members tended to have better results than companies that simply mentioned that they value diversity. They also found no clear correlation between board diversity and a company’s decision to hire Chief Diversity Officers or to establish Diversity and Inclusion Councils.
Illinois House Speaker Chris Welch, who authored the bill that became law in 2019, said the collecting of this data is a critical step in addressing representation issues. Calling out companies that are lagging in diversity at their very top level can, itself, effect change, he said.
“No one likes to be publicly shamed,” said Welch. “Shining a light on it, putting it out there, grading these companies and letting their consumers know where they rate on diversity, equity and inclusion, I think, is extremely important.”
However, Welch acknowledged that there may be a compliance issue with the reporting statute. The 74 companies that were included in the report represent less than one third of publicly-traded companies based in Illinois. According to David Druker, spokesman for the Illinois Secretary of State’s office, there is currently no mechanism in the law to compel the remainder to file their reports.
“We’re certainly going to be hammering away at companies that failed to comply with the law,” said Welch. “What kind of corporate citizen are you, if you can’t follow a basic, simple reporting law?”
Odette Yousef is a reporter with WBEZ’s Race, Class and Communities desk. Follow @oyousef.