Methodology

Updated: October 1, 2008

Methodology
Microquest agrees with the view that corporate diversity begins with the board of directors and radiates down through the executive offices and then through the ranks. The Microquest Diversity Index evaluates and ranks companies based on minority and female representation on their boards and in their executive suites.

Data
Microquest has been tracking diversity in corporate America since 1994 when we published our first directory of diverse executives: The Microquest Directory: Shattering The Glass Ceiling. 

Our research group tracks Fortune-1000-class companies and identifies female and minority executives in senior positions at these companies. Our data is used by the Executive Leadership Council (ELC) as primary research for its Census of African Americans on Boards of Directors of Fortune 500 Companies, as well as by leading national executive search firms and leading corporations including Microsoft, Starbucks and Nike.

Our detailed data includes names, titles, photographs, ethnicity, contact information, functions, industry segments and historical records. Fifteen years of ongoing research allows us to re-verify executives previously determined to be of certain ethnicities, complimenting our continuous  research efforts.

Calculation of Index
The Microquest Diversity Index aggregates the results of twelve calculations that measure the participation of women and minorities in key executive positions at America's largest 1000 companies:

The Twelve Calculations:
1. Percentage of diverse seats on board of directors.
2. Percentage of female seats on board of directors.
3. Percentage of minority seats on board of directors.
4. Is there a diverse CEO or chairman? (1 max)
5. How many diverse C-level executives? (5 max)
6. How many female C-level executives? (5 max)
7. How many minority C-level executives? (5 max)
8. How many diverse VPs? (10 max)
9. How many female VPs? (10 max)
10. How many minority VPs? (10 max)
11. How many other female minority executives have been identified?
12. How many other minority minority executives have been identified?

Counts of C-level and vice president executives allow values that cannot exceed 5 and 10 respectively. This limit is to create equity between different structures of organizations. 

For example, some large institutions may employ 400 vice presidents, while others may have only 8. Virtually by definition, every corporation must have five "C-level" executives or EVPs of primary functionality, however certain companies have broadened the definition of the "Chief Functional Officer" such that scores of people may have one of these titles. We identify and count only "key" C-level executives and restrict the maximum count to 5. 

Weighting:
The board and CEO calculations account for almost 50% of total score.
C-level diversity accounts for approximately 20% of total score.
VP-level diversity accounts for approximately 20% of total score.
Identification of other diverse executives (directors, managers) accounts for approximately 10%.

Index Score:
The total value of all the points described in the calculations and weighting equal 635. The total points are added to a base value of 365, such that the maximum score possible is 1000 and the lowest score possible is 365. 

Grade:
After calculating all 1000 index scores, the company with the highest score is awarded a grade of "100" and all other companies earn a grade based on their total index score verse the highest score.

Definitions and Clarifications:
Measuring "diversity" is not as straight forward as it may seem. Who is diverse? What ethnicities qualify? What about gay / lesbian / bi-sexual / transgender? What about handicapped and veterans and age-challenged? New issues are sure to emerge. Up until this point, Microquest has restricted its research to the identification of women and minorities. The following definitions explain the criteria we have used in building our databases:

C-Level Executives:
We classify "C-Level Executives" as the highest ranking executives at the corporate level. Our algorithm counts diverse corporate "chief" officers associated with a major function (i.e. COO, CFO, CMO, CIO, CTO) and executive vice presidents.  

Divisional presidents and chief-functional-officers who are not highly-ranked corporate officers are not tallied as C-Level Executives in our methodology. They do, however, count in the general Vice President total. 

Diverse:
Women and minorities.

Minorities:
African Americans, Asian/Sub-continent, Hispanics and Native Americans. 

Western-Europeans are generally not considered minorities. East-Indians, Pakistanis and citizens from adjoining countries are classified as "Asian/sub continent". Most people "of color" and/or from disadvantaged and/or third-world countries are considered "minorities".

Identification:
African Americans are identified by photograph or specific written notation, for example as an award winner by Black Engineer magazine. Asians are identified by photograph or written notation or by comparison of surname to a database of common Asian surnames. Hispanics are identified by written notation or by comparison of surname to a database of common Hispanic surnames. 
Native Americans must be identified by written notation. 
Given names that are traditionally female are used to identify women. In the case of given names common to both genders (like Lee, Tracy) a photograph or written notation is required to signify female gender. 
In the case where gender or ethnicity has not been determined, we do not identify the executive as "diverse."

Power of the Index
A major company without a single woman or minority on its board, in its executive suite or in any visible position whatsoever, can quite certainly be said to be non-diversified. Its roster-set and culture is absolutely white and male. Such a company will score very poorly in the Microquest Diversity Index. 

Conversely, a company with a minority CEO, and a substantial mix of women and minorities on the board and in the executives ranks will score quite highly under the Microquest Diversity Index. 

A company lacking in diversity in key areas, yet having diversification in other key areas, will score somewhere in the middle.

Our methodology for qualifying and quantifying these factors is highly effective. Our methodology considers and weighs many factors to create a total score. Reviewing the data relative to the index scores reveals that companies that appear to be more diversified, do in fact, score higher.

Power of the Data
Fifteen years of ongoing research tracking women and minorities at Fortune-1000-class companies has given us a unique data-set that is more powerful and relevant in gauging diversity than any other database. We review corporate filings and websites for every company in this survey in conjunction with our ongoing research tracking hundreds of publications and thousands of websites. We have identified and tracked more than 30,000 women and minorities since 1994. 

Utilizing our database in this new manner to create the Microquest Diversity Index has been very rewarding and we hope, a valuable service to the business community. We look forward to publishing the 2009 version in the Spring. We welcome any feedback, suggestions or corrections.

  


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