Inside The Massive New Effort To Get Minorities On Corporate Boards
In the days after the death of George Floyd in Minnesota, the nationwide protests of the killing quickly spurred a call to action on Wall Street and in corporate boardrooms to address the wide racial wealth gap in America. For too long, the top rungs of finance and corporate America have been dominated by Caucasian males. Organizations have struggled to build leadership representative of the country’s demographics, or even their own workers and customers.
As Brian Stafford, 43, the CEO of a New York-based software company watched prominent black executives such as Merck CEO Ken Frazier reflect on the lack of diversity atop business, he began to hatch a plan that may reshape corporate boardrooms forever. Stafford, using his company’s powerful software platform, is quickly building a social network used by some of the most influential investment firms and corporate insiders on the planet to recruit black and Latino board members. The plan aspires to help groom a giant new generation of diverse business leaders. From the top down, Stafford is hoping these leaders will use their influence to guide organizations and broaden the aperture of opportunity for minority communities.
Stafford is chief executive of Diligent Corporation, a privately held software provider used by 19,000 companies to host board meetings and convey important information like financial projections securely. While Diligent is far from a household name in business, some 700,000 corporate leaders use the software to handle their most sensitive documents and communications. This spring, Stafford decided that with the help of its customers, Diligent could also use its platform to create a massive directory of qualified minority board candidates across all sectors, which will help companies fill open board seats with diverse candidates for years to come.
“Even though we have moved gender diversity a bit within boards and c-suites, if you look at racial diversity it’s just really bad,” Stafford tells Forbes, “There’s a lack of transparency into the pipeline of qualified diverse candidates… Our goal is to make it as easy as possible for companies to do the right thing.”
From May through July, Stafford began to build an initiative called Modern Leadership, which has powerful partnerships on Wall Street and in corporate America and a large directly of diverse board candidates he expects will eventually fill important board roles. To get Modern Leadership off the ground, Stafford had Diligent reach out to the chief human resource officers of its 19,000 corporate customers, asking them to begin nominating talented diverse executives within their companies to to its directory of board candidates. Those nominees, Stafford expects, eventually will be placed into open board roles, helping to propel their careers.
Stafford then turned his attention to the private equity industry, where heavyweight firms are among Diligent’s biggest customers. Diligent asked ten of America’s most successful PE firms including Clearlake Capital, Insight Partners, Hellman & Friedman, TA Associates and Robert F. Smith’s Vista Equity Partners to create five new board roles apiece among their dozens of portfolio companies for diverse candidates, opening fifty new board roles. Between these PE firms, they own hundreds of companies that employ hundreds of thousands of workers nationwide. Stafford expects private equity firms to become avid users of Diligent’s director nominee portal and for them to make change the fastest as turn around their portfolio companies.
“We are proud to partner alongside Diligent in what we hope will become a long list of our peers, as we collectively advocate and take the necessary steps to ensure a major change at the board level,” said billionaire Jose Feliciano, co-founder of Clearlake Capital, of the initiative in June. Added Robert F. Smith, the billionaire founder of Vista Equity Partners, “In order to address social and economic justice, we need scalable solutions that speak to both Main Street and the boardroom… This is the right way to empower corporations to make strides towards equality of opportunity.”
“Diligent’s Director Network will enhance our board recruitment and executive search process in pursuit of better outcomes for our portfolio companies and our community,” said Deven Parekh, managing director of Insight Partners, one of Diligent’s owners alongside investors such as Clearlake Capital and Blackstone.
With private equity onboard, Stafford started to partner with influential executive search firms such as Spencer Stuart to post new board searches on Diligent’s application, making these often opaque efforts more transparent for diverse candidates. To sharpen ties with diverse communities, Diligent made inroads with about a dozen organizations such as the Latino Corporate Directors Association and the Executive Leadership Council, which have worked for years to promote diversity in the business and investing world.
Since launching in June, Diligent’s Modern Leadership effort has expanded to twenty private equity firms including recent additions such as TPG, New Mountain Capital, Francisco Partners and Sumeru Equity Partners. Other executive search firms including Heidrick & Struggles and Egon Zehnder have joined the effort, in addition to influential organizations like the National Association of Investment Companies, the American Investment Council.
With only about 11% of open board seats currently getting filled by black candidates, Stafford predicts Modern Leadership can double or triple that ratio in short order by working with its growing network of influential partners. Over the long term, he tells Forbes he believes corporate boards can reach racial and gender diversity levels of 40%-to-50%.
“I fundamentally believe that your board should be composed of individuals who look like your customers and your employee base,” says Stafford, “The opportunities we can create for talented diverse individuals is huge.”