The world’s largest stock exchange is stepping up to address a pressing challenge for its listed companies: recruiting more women and minorities to serve on their boards of directors.
The New York Stock Exchange named the CEOs of 15 companies, including Coca-Cola, Procter & Gamble and Hertz, to a Board Advisory Council tasked with identifying candidates of diverse backgrounds and connecting them with companies searching for new directors.
The candidates and company leaders are introduced through a series of networking events, including a portion that has become jokingly known as the “speed-dating” part. Candidates get five minutes to give their “elevator pitch” to each company leader at the event before a buzzer sounds. A cocktail party for more networking follows.
About 30 candidates and 18 board leaders participated in the first event on June 25, said NYSE Executive Vice Chairman Betty Liu, also the chief experience officer at Intercontinental Exchange. Another session will be held in December.
After a record surge in recruitment over the past two years, women now hold 19% of board seats on the Russell 3000 — the 3,000 largest publicly-traded companies in the U.S. — compared to 9% in 2008, according to a study by ISS Analytics. But the pace of change is much slower when it comes to ethnic diversity, with non-white people holding just over 10% of Russell 3000 seats, compared to about 8% in 2008.
The Associated Press recently spoke to Liu about the Board Advisory Council, which she conceived after finding that board diversity was a top concern among the CEOs she met during a global “road show.” The conversation has been edited for clarity.
Q: Why did the NYSE decide it should have a role on board diversity?
A: It just kind of dawned on me when I came back from this road show that, look, we have the most unique community of companies here. If there was anybody that needed to source a board candidate, those candidates must be in our own community of 2,300 companies, so why don’t we offer up this great database essentially that we have here.
Q: I’m fascinated by the “speed-dating” aspect. What was the reaction?
A: People just thought it was fun. I joked that this could either be a tremendous success or a disastrous failure. It could go one of two ways, and luckily, it became a tremendous success, and people were very into it. It was a little awkward in the beginning. People thought, how’s it going to go in five minutes? And everyone loved it. It just brought an energy to the room.
Q: What is driving the pressure on companies to diversify their boards?
A: One, it’s the right thing to do. The second is shareholders. I think more and more shareholders are demanding that of their companies. It’s seeing where the hockey puck is going. It’s where the public sentiment is. I think that’s also causing leaders to sit up and say, “you know what? I don’t want to be behind the curve on this. I want to be ahead of it.”
Q: What are the biggest challenges when it comes to achieving board diversity?
A: The biggest obstacle is the network. Some of the CEOs I talked to said, “if I’m having a hard time finding a candidate, it’s not so much that there aren’t candidates out there, it’s that my network’s not big enough.” When I heard things like that, I felt, “let’s expand that network.” Board diversity is not a pipeline issue, it’s a network issue.
Q: What are your thoughts on best practices for recruiting diverse candidates?
A: CEOs and boards are expanding their definition of what makes a good board member. Because if they look at just title, a former CEO or a CEO, then that pool is naturally very narrow. There are many women and minorities who are very capable that might not have that title. Go beyond title. What’s the skillset, what’s the type of person that you need on that board?
Q: Did the candidates at the June session have prior board experience?
A: Some of them did, but most of them didn’t. Because what tends to happen is that the same people get invited on boards, so what we need to do is expand that network to people who have never been on a board. We had people who were entrepreneurs, who were CEOs themselves, we had people who were running multibillion-dollar businesses within large corporations, and then we had people who were in the nonprofit space.
Q: What is your advice to first-time candidates seeking to get on a board?
A: First, raise your hand, and be intentional about telling people that you are interested in a board position. The second thing is the skills that got you to where you are sometimes may not be the skills that make you a good board member. Some board members, when they come on, they think they are managing the company, they think they are managing the CEO. That’s not really your role. So just learn from other board members. Try to find other board members and make them mentors.