Corporate Boards Are Too White, Too Male – and Too Old

{snip}

As the jury deliberates in the fraud trial of Theranos’ founder Elizabeth Holmes, too little attention has been paid to the failure of Theranos’ board and the lessons to learn from it. {snip}

But corporate America’s boards haven’t evolved much since the 20th century. Too white and too male, they are being forced by social pressure and regulatory mandates to recruit more women and people of color. These boards are also too old and out of touch, rife with industrial-era yes-men who are beholden to their CEOs and ill-equipped for the digital age. Among companies in the S&P 500, the average board director is 63 and trending older, according to research from The Conference Board.

Too many of today’s corporate directors lack the relevant experiences to meaningfully oversee executive teams, spot early signs of overreach, or steward their companies through coming business challenges. More racial and gender diversification is a good start, but far from enough. Future-looking boards also need to get younger, more independent and better-skilled in emerging areas, such as cybersecurity, artificial intelligence, and automation. The best way to do this is for institutional investors, regulatory agencies, and banks to band together to influence boards to require these four things:

Be transparent about board composition

Boards of publicly traded companies are disclosing more than ever before. In 2021, 59% of S&P 500 companies disclosed the racial composition of their boards, up from 24% in 2020. Private company boards should provide even more comprehensive demographic disclosures. As an early-stage investor in several dozen startups, I encourage companies I’ve invested in to measure and manage board composition across metrics that not only include race and gender but also age, skills, expertise, management style, political ideology, and geography. Quantifying this information is the first step in understanding how the board’s demographics might make it susceptible to blindspots, and disclosing it will allow for better accountability.

Post board openings publicly

Right now, board recruitment happens entirely behind closed doors. Companies fill openings through their existing networks or executive search firms, reinforcing board homogeneity. Instead, companies should be more transparent about when they are recruiting for board seats. {snip}

Seek out more independent directors

The fastest path to improving board composition is to increase the share of independent board directors, those without a pre-existing relationship with the company. {snip}

Create age-related interview quotas

Companies should implement an age-related interview quota for new board seats. {snip}

In a world where Reddit threads can make or break a stock, every company is vulnerable to ransomware, and diversity is a universally-accepted asset, corporate directors need technological savvy, an ability to challenge traditional corporate orthodoxy and intuitive knowledge about the markets they are serving. {snip}