In the US and around the world, investors and shareholders have pushed for greater diversity on corporate boards both as a competitive business advantage and sound corporate governance. While we are beginning to see some traction regarding gender diversity—a positive development that must continue in order to narrow the gender gap—there is still a major seat left vacant at the table. Latinos, a driving force fueling America’s economy, remain undertapped assets for corporate boards.
On Capitol Hill today, the US House Committee on Financial Services focused on this very topic, examining various proposals to increase diversity of America’s boards. As leaders of the Latino Corporate Directors’ Association (LCDA), we were asked to submit testimony on the value of gender, racial, and ethnic diversity on corporate boards. LCDA values inclusion and supports a sensible, balanced approach to board disclosure as an important step towards achieving greater boardroom diversity. While we are advocates for greater gender, racial, and ethnic diversity on corporate boards, our focus is on Latino leaders.
See the webcast of this hearing
While Latinos represent the fastest growing segment of customers and employees of today and tomorrow, a vast majority of the largest corporations lack Latinos at the highest levels of corporate governance. LCDA tracking of Fortune 1000 companies shows that 75 percent lack a single Latino or Latina director.
Today, LCDA released new Institutional Shareholder Services (ISS) data looking at the board composition of S&P 1500 companies over the past ten years. The data reveals that Latinos currently hold only 2.8 percent of the S&P 1500 company board seats. Even more disturbing is their share of seats increased by just 1 percent in the last ten years. Based on the data, Latinos are the group least represented in the boardroom. This poor representation is far below Latinos’ size of the population and economic clout.
The fact is, Latinos account for the vast majority of the growth in the US workforce, approximately 74 percent of the 10.5 million workers to be added to the labor force through 2020. Latinos are also driving consumption. The US Latino gross domestic product (GDP) represents a whopping $2.13 trillion.
While their consumer clout is increasing, the appointment of Latinos among new directors is actually decreasing. In 2018, the number of Latino directors was 4 percent, down from 6 percent in 2017, according to Heidrick and Struggles.
And when we dig deeper into the data and look at gender, we find Latinas hold only 0.5 percent of S&P 1500 company board seats. Their pace of growth for board seats is dismal, with an increase of 0.17 percentage points between 2008 and 2019. That compares to 19.5 percent of Caucasian women, 2.05 percent of African American women, and 1.05 percent of Pan-Asian American women. Latinas are leading the way in business formation (US Department of Commerce 2016 report, Deep Dive into Hispanic Business Ownership), yet remain largely untapped for corporate board service.
The first step in addressing this problem is exposing it. Disclosure and transparency on the diversity composition of boards is an important step to advance board diversity. LCDA supports a sensible, balanced approach to collecting critical data on board demographics and recently issued a resolution in support of S.360 and H.R. 1018, the “Improving Corporate Governance Through Diversity Act.” This bill would require public companies to disclose data, based on self-identification, of the racial, ethnic, and gender composition of their boards of directors, nominees for their boards, and corporate officers. There is a growing list of broad-based supporters for the legislation, including the US Chamber of Commerce, the Council on Institutional Investors (CII), and many civic organizations in support of this bill.
Today’s committee hearing helped to shed a light on the state of diversity in the boardroom and needed measures to track and monitor progress for all major segments of the population. While it is widely accepted that diverse experiences from gender, race, and ethnicity lenses are assets in the boardroom, the missing piece for corporate America is that Latinos remain largely untapped for board service.
It’s past time that Latinos had a seat at the table. Corporate America must ensure that every slate of board candidates for each and every seat includes one or more Latino candidates.
Roel C. Campos is chair of the LCDA board, corporate director, and former commissioner of the US Securities and Exchange Commission; Patricia Salas Pineda is an LCDA cofounder and immediate past chair, and corporate director; and Esther Aguilera is president and CEO of the LCDA, the only membership association consisting of US Latino and Latina experienced directors and board-qualified executives.
The Latino Corporate Directors Association (LCDA) provides a solution and serves as a trusted source to boards, search firms, and private equity interested in gaining access to exceptional Latino board talent. The LCDA supports efforts to address the underrepresentation of qualified Latinos, women, and minorities in the boardroom.