Underrepresentation in LGBTQ+ Board Membership Hampers Corporate Performance
A new study has revealed that while LGBTQ+ people represent over 7% of the U.S. population, only 0.6% of Fortune 500 corporate board members identify as LGBTQ+. Of course, the issue of underrepresentation on U.S. boards is not unique to those who identify as LGBTQ+. According to a study by the Alliance for Board Diversity and Deloitte, as of 2020, just over 1% of U.S. Fortune 500 CEOs were Black despite Black people making up 12% of the U.S. population, and only 4% by people of Latino/a origin despite that group reflecting 19% of the population. Perhaps the most defining statistic of all is that there are currently only six women of color CEOs of Fortune 500 companies.
As we noted in an earlier Nasdaq column, studies have indicated that greater social inclusion of the LGBTQ+ community has driven advancement in economic development. In fact, economist Lee Badgett of UMass Amherst has demonstrated a statistically significant mutual reinforcement between LGBT inclusion and GDP growth, determining that the exclusion of LGBTQ+ individuals has hampered economic growth across more than 120+ countries.
While the case for LGBTQ+ representation and overall diversity in leadership and board rooms is increasingly clear, the reality differs greatly. In its analysis of the causal factors leading to underrepresentation of LGBTQ+ professionals on Fortune 500 boards, the Association of LGBTQ+ Corporate Directors has identified three pillars of exclusion:
- First, the generation of leaders who are currently in their 60s and 70s were highly discriminated against. As a result, few made it to the top of the corporate world. In addition, the HIV/AIDS epidemic took a huge toll on that generation overall. Given that the average age of a corporate board member is over 60 years old, this first causal factor is a significant one.
- Second, specific industries hold tight to standing biases. Sectors like education, transportation, energy, and manufacturing, and industrial product industries have been historically slower to welcome LGBTQ+ talent. As a result, progress in board representation of LGBTQ+ professionals has been more concentrated in tech, media, professional services, and similar industries.
- Third, it’s still all about who you know - there’s a network gap. This network effect is significant when it comes to the process of filling board seats. Informal networks centered in largely exclusionary groups, locales, and activities (the study notes Martha’s Vineyard, golf, and other such enclave-like subsets) have historically excluded diversity in its many forms, including LGBTQ+ people.
Beyond the obvious ethical and moral issues the imbalance in corporate board representation highlights, it also stands in stark contrast to an empirical fact: diversity of thought and perspective on leadership teams translates to better performance while lack of diversity has proven to increase risk. To put it another way, investors not demanding more diversity on boards—including with LGBTQ+ candidates—are leaving money on the table.
Of course this missed opportunity does not have to persist. Investors, acting as effective shareholders and good stewards, can help to set policies and standards, engage with entire industries (not just individual corporations and firms), and otherwise make the case that cultivating and appointing LGBTQ+ and other diverse candidates to the leadership and boards of companies is a win-win for society and long-term performance. In fact, investors can hold these companies accountable when they tout their support for the LGBTQ+ community but fail to integrate LGBTQ+ talent and leadership.
As the next Pride Month comes into view and companies clamor to drape themselves in the brightest rainbow colors only to paint over them a few weeks later, the financial community has an opportunity to challenge the heuristics and implicit biases that have served as barriers to greater LGBTQ+ representation on boards. Doing so would help ensure that the many gestures that will inevitably be made come June are not empty.
Megan Kashner is Co-founder ofColorful Capital and a professor and Director of Social Impact at Northwestern University's Kellogg School of Management. William Burckart is Co-founder of Colorful Capital and CEO of The Investment Integration Project, an applied research and consulting services firm that helps investors manage systemic societal and environmental risks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.