“If you’re an investor, you’re looking for ways that companies can outperform,” said Ann Miletti, who is both chief diversity officer and head of active equity at Allspring Global Investments. “We generally agree that the more diversity you have on your board, the better performance that you’re going to get in the long run.”
The push for more racial and ethnic diversity on boards follows years where the focus was mostly on gender. Thursday’s numbers from Equilar show how women from racial and ethnic minorities are among the least represented on boards. Just 0.9% of U.S. directors are Hispanic women, for example, half of the already low 1.8% for Hispanic men.
Some of the requirements to increase diversity have met stiff resistance. California, for example, passed a law in 2020 requiring companies with principal offices in the state to have a minimum number of directors from an underrepresented community. That includes people who self-identify as Black, Hispanic, Asian, gay, lesbian, bisexual or transgender.
A California state court earlier this year ruled the requirement unconstitutional following a complaint that it violated California’s equal protection clause. The judge wrote in his decision that the state should have considered other options for achieving greater diversity on boards before mandating it.
Such requirements did end up increasing racial diversity on boards, but in an uneven manner, said Vicki Bogan, professor at Cornell University’s SC Johnson College of Business.
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