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"Getting on a board is like being invited
into a secret club," notes James Kristie,
editor of Directors & Boards magazine.
"There's a collegiality that's required, so
you aren't going to be invited in unless you've
demonstrated that you can work within the system
and the club. No one wants a wild card."
In
part, that mindset has led companies to repeatedly
draw its minority board members from a
concentrated, high-profile list filled with
academics and politicians. Former congressman
William Gray sits on eight boards: Dell Computer,
EDS, J.P. Morgan Chase, Pfizer, Prudential
Financial, Rockwell, Viacom and Visteon. Shirley
Ann Jackson, president of Rensselaer Polytechnic
Institute, is on nine: Albany Molecular Research,
AT&T, FedEx, KeyCorp, Marathon Oil, Medtronic,
PSE Group, Sealed Air and U.S. Steel.
Jackson,
who bristles at criticism that she holds too many
directorships to effectively protect shareholder
interests, acknowledges that openings flourished
after she became a director in 1982. "Once
you are on one board, you're on the radar
screen," she says. "I couldn't guess how
many seats I've rejected."
Swygert,
who also holds board seats at Fannie Mae and
Hartford Financial Services Group, suggests the
candidate pool could expand if more established
directors rejected additional directorships.
"I
try to direct headhunters and CEOs to other
qualified candidates," he says. "In
2002, it's simply unacceptable and very dated for
anyone to say they can't find qualified
candidates."
Plenty
of opportunities?
If
exclusivity and a mindset of entrenchment are
issues, board turnover isn't. Most boards have
mandatory retirement ages. With directors on major
boards now averaging nearly 61 years old, about
1,800 Fortune 1,000 directors resign each
year. The annual exodus could double by 2004 as
boards come under more scrutiny and as tougher
guidelines for board independence and auditing
expertise phase in.
Median
directors' pay at big companies hit nearly
$116,000 last year, according to consultant
Mercer. But high-profile scandals at Enron, Tyco
and other firms have made big retainers less
alluring, especially for those on audit and
corporate-governance committees. Time spent on
board matters has jumped to 15.3 hours a month, up
17% in the past year alone, consultant Korn/Ferry
International says in a recent directors survey.
Still,
resignations and heavier workloads have not led to
a windfall for minorities. "Frankly, there
are a number of minorities I thought would be on
boards by now," says Roger Raber, head of the
National Association of Corporate Directors trade
group. "They're qualified, and they deserve
it."
Joe
Goodwin, head of Atlanta-based recruiter The
Goodwin Group, says the post-Enron era could make
it even tougher for minorities to gain broader
access. "The hoops through which even
experienced CEOs have to jump to take a board seat
are more numerous and demanding," he says.
Moreover,
soaring liability insurance premiums for corporate
officers and directors will likely accelerate a
decade-long trend to smaller boards, hampering
access by minorities simply by reducing board
seats, Goodwin says.
A
greater hindrance is the makeup and mindset of
most traditional boards. "There is still a
fear of diversity," says Susan Shultz,
founder of recruiter/consultant SSA Executive
Search International and author of The Board
Book. "It's natural to surround ourselves
with people just like us. Anything different
requires a proactive leap of faith."
Making
the leap
Board
diversity is paramount at companies such as Sempra
Energy, a San Diego-based energy provider. CEO
Stephen Baum insists on it. Sempra's 13 directors
include two women, two African-Americans, a
Hispanic and an Asian-American.
Diversity
goes beyond good public relations, Baum says.
"It provides diversity of opinion and a
different perspective. It causes us to think a
little more. The quality of our decision-making is
better. If we were all right-wing Republicans, we
might miss opportunities."
Faced
with tougher recruiting tasks, more companies now
use corporate headhunters to conduct board
searches. But headhunters are able to make
minority recruiting only so much easier.
Julie
Daum, who heads recruiter Spencer Stuart's board
diversity practice, says companies still rank
active and former CEOs as top board candidates.
Accounting scandals have also made CFOs hot
prospects. But there are few minority CEOs and
CFOs, further limiting board openings.
"It
would be easy to trot out the same old cast of
characters, the high-profile women,
African-Americans and Hispanics who serve on
multiple boards," Daum says. "But they
are boarded out, and companies are no longer
interested in meeting some kind of quota."
Opening
doors
The
Executive Leadership Council (ELC) and another
Washington-based advocacy group, the Hispanic
Association on Corporate Responsibility, are
ramping up efforts for broader board inclusion by
raising profiles of board-ready candidates and
educating future prospects.
ELC,
helped in part by grant money from consumer
products giant Philip Morris, sponsors director
seminars and certification programs on corporate
governance and board functions. ELC's senior
members, whose ranks include American Express CEO
Ken Chenault, AOL Time Warner CEO Dick Parsons and
Merrill Lynch COO Stan O'Neal, are mentoring a
younger generation of executives.
The
Hispanic Association on Corporate Responsibility
is partnering with executive search firms and has
developed a database of more than 1,000
prospective board candidates.
"Hispanics
have made substantial gains on corporate boards
the past decade, but with less than 2% on Fortune
1,000 boards, there's an enormous gap,"
says HACR President Anna Escobedo Cabral.
Few
expect big gains soon. HACR's plan is a five-year
effort. "If we did nothing, it would take 25
years for boards to reach parity with the Hispanic
population," Cabral says.
ELC's
program with Philip Morris will run three years.
It hopes to have 50% of its members on boards by
2004, up from 25% now. But Brooks says ELC is
falling behind. "We figured companies would
be knocking on the door," he says. "I'm
not sure if headhunters are being as aggressive as
they need to be or CEOs have other things on their
mind. But it's slow."
Marvin
Perry, director of the Phoenix-based Black Board
of Directors Project advocacy group, says minority
organizations may have to get tougher and far more
vocal in promoting their cause.
"Among
traditional black organizations, the idea of
serving on corporate boards has not been as
emotional an issue as, say, joining country clubs,
so it hasn't been pushed as forcefully," he
says.
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