Former BET Chairman Debra Lee: Keep Pressure on Corporations To Expand Black Board Representation
Some 20 years ago, Debra Lee, then chief operating officer of Black Entertainment Television, gained her first corporate board appointment when she was tapped to serve as a director for Kodak, the leading photographic film products manufacturer at the time. “I think the only reason they looked at me was due to the fact they called Bob Johnson, the CEO of BET, and asked him to be on the board. He was on too many boards so he said, ‘You should talk to my COO,’” she recalls. “That’s how I happened to get on a board.”
Over the past two decades, Lee has become a much sought after board recruit due, in part, to her incomparable management experience and impeccable judgment. Since retiring from her position as chairman and CEO of BET Networks a year ago, offers for board service continue to flow her way. In addition to her directorships at S&P 500 companies AT&T and Marriott International, she has recently gained a seat on the board of London-based Burberry Group PLC, the British luxury fashion house.
Along with providing strategic advice related to a range of business concerns, she champions diversity and inclusion at the companies in which she serves to ensure that it is a business priority. The following are edited excerpts of Back Enterprise‘s interview with Lee, a member of the B.E. Registry of Corporate Directors:
Even though surveys have shown that diversity in the boardroom has made companies more innovative and profitable, why is there still resistance in terms of racial diversity in the boardroom?
Well, it’s hard to say why companies are still reluctant to have racial and ethnic diversity in the boardroom. I’ve served on boards for various companies for over 20 years and for over 20 years we’ve been talking about the importance of racial diversity, having more women on the board, and all kinds of diversity. And it does seem to hold true that companies that have diversity tend to do better. So I think it’s still part of that old boys’ club atmosphere.
Sarbanes-Oxley tried to get rid of the old boys’ club by saying you had to have search firms look for board members, you couldn’t have your friends sit on boards and there couldn’t be interlocking board positions. I think it helped companies broaden their search and become more open to having a diversity of people, but still, some companies drag their feet and stay within the realm of people they know. No one likes quotas. Some people just hate the term. But you have to look at the numbers. That’s the only measurement we have of whether these rules are working.
Diversity Adds Value
When we first developed our B.E. Registry several years ago, most large tech firms based in Silicon Valley did not have any African American directors. Then we made this information public. Now, a good number of them not only have one African American on their board but multiple black board members. Do you think more corporations are finally realizing the value of diversity in the selection process?
I think companies feel the pressure from outside groups when they don’t have diversity on their boards. So there are signs of progress. I think we need to keep the pressure on boards and keep reminding them that this is important. The tech industry has its own special issues. It’s a very young industry. Some of these companies were created in garages by friends and private investors.
When I went on the Twitter board three years ago, the company was in the process of [removing] all the VCs who had invested in the company early on. They were at the point where they had to become a real company—have corporate governance and follow the rules. So, I was the first African American to go on the Twitter board. I stepped down at the end of August, but before I left I made sure there was another black board member. That’s the other helpful thing about getting one foot into diversity—then you have someone in the company who can help you find other board members.
Are corporate boards becoming more diverse because now companies are looking for different types of directors than just CEOs?
I see more and more companies broadening their definition of what would make a good board member. I’ve seen tech firms look for people with government experience. Some companies look for marketing experience now. Some just look for other people that have been on other boards and have good governance experience. So, I think it is very important that we get away from the feeling that only CEOs or former CEOs can serve on boards; because companies have different needs. When they recognize those needs and look for people that can fill those needs that adds more diversity to the board.
Diversity also keeps companies out of trouble. You look at what’s happening in the fashion industry with Gucci and Prada. Mistakes are made when you don’t have diversity on the board level and in the executive team and employee force. So, it’s real important to have people that will pull your coattail when you’re doing something that may be offensive to your consumers.
Leaders must reach back as they climb
With the lack of black CEOs and senior managers, what can black board members do to improve C-suite representation?
When African Americans, women, and other ethnic groups get on boards, we have to find it incumbent upon ourselves to speak out and make sure when companies look for a new CEO or COO that they have a diverse slate. We have to hold their feet to the fire in terms of the pipeline. Don’t wait until you get to the CEO seat. Start asking on the executive VP-level and the senior VP-level: What does your executive team look like?
When you’re on a board you have to work with the human resources department and when they come in to present, you have to ask them questions about the atmosphere of the company, the numbers that they have in terms of people of color and women, how long they’ve been there, whether people are being promoted.
That’s one thing I was proud of at Twitter. They started, at my request, reporting to the board every quarter about the numbers. I’m on the Marriott board. We have a committee on excellence and I’m the chair. The company has to report to me every quarter on what the numbers look like. How many have left, how many had been recruited, how many of them promoted. Not only that but supplier diversity—the number of hotels owned by people of color and women.
As newly minted board members come onto boards, how should they go through the process of finding their voice?
I think the best way to find your voice as a board member is to be prepared, read the materials they send out ahead of time because boards expect you to do that. If you read the materials, you know what the issues are and you can engage in a conversation about that. If you’re not prepared, you’re operating in the dark.
I’ve heard some people say when you go on a board you should wait two or three board meetings before you start speaking up. I don’t think that’s necessarily true if you hear something the first board meeting that you have an opinion on. It does take a while to get the rhythm of the board and know the other board members. Invariably, in any boardroom, there are a couple of board members that talk all the time and some that don’t ever say anything. Boards are like small cultures. They have to feel each other out and you have to build your respect, so it takes time to really feel comfortable. But on things that you feel strongly about, you should speak out day one.
Power In The Boardroom: Our Annual Progress Report on Black Representation in Corporate Governance
For the past seven years, Black Enterprise has produced our annual Power in the Boardroom report, examining black representation and participation in corporate governance at the nation’s largest publicly traded corporations. As such, we have focused on companies that comprise the entire universe of the Standard & Poor’s 500 to gain a complete and comprehensive picture of corporate diversity and inclusion at the highest level.
Our raison d’être, for the most part, has been to ensure our audience members—like you—have a full understanding of the significance of blacks populating these governing bodies. As Arnold Donald, a member of the B.E. Registry of Corporate Directors who serves as president and CEO of Carnival Corp. & plc and corporate director of Bank of America, told Black Enterprise: “The reason diversity matters is that if they’re shareholders or investors, you want the company to be successful over time. Diversity does matter when it comes to results. Secondly, communities thrive when businesses thrive. Any community that’s had a major business fail knows it affects everything—quality of life, education, arts, recreation, you name it. And then the third reason is one of social justice. You don’t want anybody being disenfranchised, feeling like they don’t have opportunity.”
Opportunity is the byproduct of corporate policies and practices related to hiring, training, and promotion of employees; procurement of suppliers; and philanthropic giving to charities and causes. So if you care about jobs for African Americans, contracts for black-owned firms, or the allocation of dollars to support nonprofits in communities of color, then you must care about board diversity.
The essential driver is leadership. Board members play a most critical role in the evaluation and selection of the chief executive. Think of them as the boss’ boss. As such, this function has gained greater urgency as corporate America continues to grapple with the embarrassingly vexing problem of lack of melanin among CEOs and C-suite executives in line for succession to the top spot. The Executive Leadership Council, the preeminent organization of black senior executives, continues to be on the front lines of this battle and now the Congressional Black Caucus has joined the fight.
That’s why board leadership is equally important. BE found 21 black chairmen and lead directors on the boards of the S&P 500. The upshot became evident when Jide Zeitlin, B.E. Registry member and chairman of the board of Tapestry Inc., was recently named CEO of the company, which houses luxury and lifestyle brands such as Coach, Kate Spade, and Stuart Weitzman. Zeitlin, a corporate director since 2006 and the chair since 2014, now represents one of six black S&P 500 CEOs.
Corporate leadership is a major focus in our exploration of the advancement of blacks to board and C-suite positions. This report also includes our analysis of the unprecedented gains of white women in corporate governance as blacks and other people of color lag as well as state and federal legislative action as a means of correcting racial imbalance in the boardroom.
Snapshot of African American Boardroom Representation
Here’s the configuration of this year’s B.E. Registry: There are 322 black corporate directors at 307 companies versus 308 at 316 corporations last year. Our editorial research team also discovered that 187 S&P 500 companies or 37%, did not have a single black board member in 2019—a 2 percentage point improvement from 2018.
There has been an encouraging trend reversal related to board diversity at some of the nation’s largest tech companies though. For example, black corporate directors were absent from Amazon, Apple, eBay, Facebook, Alphabet Inc. (then Google), Hewlett Packard Co., and Netflix just six years ago. Today, these companies all have blacks on their boards. Facebook, Alphabet, and the reconstituted HP Inc. each have two African Americans with seats at the boardroom table. However, tech leviathans such as Cisco, Oracle, and Intuit still refuse to include blacks in corporate governance.
Linda Gooden, retired executive vice president for Lockheed Martin’s Information Systems & Global Solutions, says: “Many of the tech companies, particularly in Silicon Valley, are working diligently to address the diversity issue. This trend will continue because the demographics of the nation and the composition of the workforce is rapidly changing along many dimensions and the likely business stakeholders—customers, shareholders, and employees—are becoming increasingly diverse.”
Debra Lee, the former chairman & CEO of BET Networks who served on the board of Twitter, maintains that “there are signs of progress. I think we need to keep the pressure on boards and keep reminding them that this is important.” In fact, when Lee left the board of the social media giant, she ensured that her replacement would be a black woman: Ngozi Okonjo-Iweala, a senior advisor to the global asset management firm Lazard Ltd. and former Minister of Finance for Nigeria. This is Okonjo-Iweala’s first year as a member of the B.E. Registry.
White Women Gain, African Americans Lag
Recent developments confirm there has been a greater emphasis on gender diversity than on racial inclusion in corporate governance. For instance, the S&P 500 recently reported that women can be found on the board of all index companies. And California became the first state to require publicly held corporations to include women on their boards; according to the law, companies must have a minimum of two or three women, depending on the size of their boards, by 2021 or risk being fined $100,000 for a first violation and $300,000 for a second. California State Treasurer Fiona Ma has been so committed to “shattering this glass ceiling” and getting companies to comply with the statute that she created a registry for potential female board members to share information with corporations and engage in candidate–board matchmaking. Now, four other states—Maryland, Colorado, Massachusetts, and Pennsylvania—are considering similar gender-specific diversity legislation.
B.E. Registry member Peggy Alford, senior vice president of core markets at PayPal Holdings Inc., a digital payments company, weighed in on recent developments. In May 2019, Alford was appointed to the board of Facebook Inc. (Kenneth Chenault, former chairman and CEO of American Express, is the other African American on the board) and also has a seat on the governing board of Macerich Co., one of the nation’s largest owners and operators of shopping centers. “I’m no lawyer, but I believe legislation would have to happen on the state level as opposed to mandating something federally, whether it was related to gender or race,” she says.
Alford cites several factors on why there hasn’t been similar progress related to racial board diversity. For one, state legislative action focused on gender diversity, she says, is a direct result of pressure applied by institutional shareholders, and equivalent demands haven’t been made on the racial front.
Secondly, she maintains that most board referrals are driven by relationships and target C-suite executives, and more white female executives have been elevated to top corporate echelons than African Americans and people of color. As a result, black candidates, for the most part, have not been placed in the board pipeline.
Legislating Diversity in Corporate Governance
So can racial diversity on boards be driven by government fiat? Some new local and federal measures seek to test this premise. For instance, one proposed legislative remedy that at least takes aim at racial board composition is a bill recently passed by the Illinois General Assembly directing publicly held companies to place a woman as well as an African American and a LatinX on governing bodies by year’s end. To buttress this action, the secretary of state’s office will publish an annual corporate board diversity report and levy a fine against noncompliant corporations.
On the federal level, the House Financial Services Committee, chaired by Rep. Maxine Waters (D-CA), approved two such bills with bipartisan support. Rep. Gregory Meeks, a New York Democrat and CBC member, introduced the “Improving Corporate Governance Through Diversity Act of 2019,” requiring public companies to publish data annually in their proxy statements on the racial, ethnic, and gender configuration of their boards, nominee slates, and executive officers. “I commend California for recognizing the need to address the lack of diversity on corporate boards, acting to make the highest levels of corporate America more reflective of the nation as a whole. While its legislation addresses the lack of women represented in the C-suites and boardrooms, minorities and people of color are significantly underrepresented as well,” Meeks told be via email. “My legislation in Congress would require companies to disclose publicly whether those top positions include women, people of color, and veterans. Not only is transparency good for the public, it is good for investors looking to determine which companies are recognizing the value diversity brings to corporate decision making.”
Another measure, “The Diversity in Corporate Leadership Act of 2019,” was sponsored by Rep. Carolyn Maloney (D-NY), chair of the U.S. House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets. It mandates the Securities and Exchange Commission to establish a Diversity Advisory Group to study and make recommendations on strategies to increase racial, ethnic, and gender diversity among corporate boards and provide full disclosure to shareholders.
The HR Policy Association reports that both pieces of legislation received strong praise from members of both sides of the aisle with Diversity and Inclusion Subcommittee Chair Rep. Joyce Beatty (D-OH), another CBC member, citing that “leaders set the tone” and that her conversations with corporate heads continue to reveal many companies with nonexistent diversity and “no plan to get there,” prompting the need for legislative initiatives. While Rep. Andy Barr (R-KY) advocates collapsing the “duplicative and inconsistent legislation” into a single bill, Beatty maintained that the bills don’t conflict with one another and both should be enacted into law.
Another encouraging model comes from the Midwest Investor Diversity Initiative, a group of 11 pension and union funds with a collective $750 billion in assets. The Initiative, which includes the Illinois State Treasurer’s Office, United Auto Workers Retiree Medical Benefits Trust, and Ohio Public Employees Retirement System, has convinced 24 companies in Illinois, Michigan, Ohio, Indiana, Minnesota, and Wisconsin to adopt practices that resemble the NFL’s “Rooney Rule” in stressing the inclusion of people of color for directorship consideration. According to recently released data, 10 boards have already added new diverse members as part of the process. The significance of such an alliance is the fact that public pension funds include significant investment dollars from African American workers. “We’re really one of the first investor coalitions in the country to include race and ethnicity in the push for companies to increase and enhance board diversity,” Meredith Miller, chief corporate governance officer for the $61 billion UAW fund, told Crain’s Detroit Business.
Creating A Pipeline To The C-suite
In order to make progress on diversifying corporate governance, Alford contends boards will need to continue to take intentional action to expand the pool of minority candidates by considering a broader set of professional networks. In addition, as the numbers grow, there will be more opportunities for minority board members to recommend minority colleagues for such opportunities that come their way. Based on her experience, the greatest difficulty has been obtaining that first board seat: “After you serve on a board, more companies learn about you and demonstrate an interest in talking to you about available opportunities that you may not have the capacity to consider, which creates an opportunity to recommend other equally qualified candidates.”
Gaining that positioning, however, often coincides with black professionals accessing the C-suite pipeline. b.e. Registry member Guardie E. Bannister Jr., former president and CEO at Aera Energy L.L.C. who completed a five-year term as lead independent director of Tyson Foods, says there are a lot of efforts to help enable more blacks in the C-suite but “the data shows that we have not made much progress.” So Banister challenges black directors, senior executives, and retirees to “double down on efforts,” using their clout to bring more young black professionals into senior management. He also believes black directors need to do more to mentor, nurture, and coach up-and-comers. Asserts Bannister: “Now, more than ever, people need to take a stand in advocating talent and eliminating barriers to progress.”