The Role of Boards in Fostering DEI
A must for any global company, DEI (diversity, equity, and inclusion) has moved to the forefront of the workplace conversation. While it’s been widely acknowledged that DEI is both a moral and business imperative, many organizations continue to struggle with the challenges of developing a comprehensive DEI strategy.
According to BCIU Director and Chair of the Board Jim Nevels, achieving company-wide change begins with leadership. As the decision-making body, boards represent the highest level of an organization. This means that they have a responsibility not only to support and intentionally prioritize DEI, but also to be reflective of the communities they serve.
Nevels has a long history of service on the boards of notable organizations, and throughout his tenure, he’s witnessed a shift in corporate efforts to foster DEI in the workplace. According to Nevels, it all starts with the board.
“DEI is not just letters,” Nevels says. “It’s a concept that has form, substance and practice. The work must begin as a strategy that is articulated by the governance structure, which is the board.”
Diversity for Growth
In addition to his securities and investment knowledge, Nevels’ experience includes serving on the boards of eight publicly traded companies, including the Hershey Company. Over time, he’s seen organizational change, with Hershey being a prime example.
“Before departing Hershey, and I’m very proud of this, the board saw fit under my leadership to name, for the first time in 165 years, a woman to head the company, Michele Buck,” he says. “Under Michele’s leadership, the company has grown and prospered and become more international.”
This is not a coincidence, Nevels says. Diversity is a critical component of being an international company, one of depth and reach, making DEI a must-have, not a may-have, for organizations looking to expand. Like keeping up with a shifting economy, changing consumer interests or new technologies, if a company can’t adapt, it can’t survive long-term.
“I believe that a corporation is a living organism,” he says. “It morphs and changes, or it dies. We must view corporations as more than an organization, but an aggregate of ideals and culture, with the ability to change.”
DEI is ESG
So how can organizations go about prioritizing DEI? In the corporate world, DEI is often tied in with ESG, or environmental, social, and governance. Nevels mentions that boards are now building ESG and DEI components into operational officers’ compensation.
“That is something that you did not see until maybe the last decade, but that really puts your money where your mouth is,” Nevels says.
It helps ensure that DEI as a corporate strategic initiative extends past the board to both the C-suite and senior management, which is imperative. Otherwise, it is too easy for boards to set lofty aspirational goals that then are not built into the day-to-day planning process at the operational level — something we have seen all too often in the past.
In addition, the Securities and Exchange Commission (SEC) has begun to regulate diversity disclosures to ensure organizations are meeting their public commitments. This kind of external pressure further persuades publicly traded companies to implement — and maintain — DEI practices.
“When a corporation and its board and its management don’t maintain certain standards, invariably what happens is it finds its way into the public domain either through print media or more often nowadays the internet,” Nevels says. “And the reputational risk and damage can be crippling.”
What Is Equity?
To Nevels, the “diversity” and “inclusion” aspects of DEI are easier to define and measure than the “equity” component. When it comes to equity, Nevels has often explained it to fellow board members as an economic concept.
“It is about assuring that stakeholders, in the broadest sense of the term, have the opportunities to thrive and share in the American dream,” Nevels says.
Exercises in equity, he says, are when company leadership, sanctioned by a board of directors, reaches out to its respective communities to find opportunities to assist in issues relating to the health and welfare of stakeholders in their respective markets. Nevels cites the aftermath of the death of George Floyd as an example, where organizations pledged over $5 billion to advance racial equity.
“That’s the good news, the exercise in equity,” he says. “The bad news is that, as of six months ago, less than one percent of those pledges have been actually committed or spent. That’s what we’re still working on, how do we effectuate the ‘E’?”
One promising initiative, per Nevels, is Amazon’s effort to consolidate and focus giving through the launch of a $2 billion Housing Equity Fund to preserve and create over 20,000 affordable homes where its three headquarters are located. “These investments help both the community and the corporation by maintaining a diverse workforce in their regions and allowing employees to build net worth and move towards home ownership,” he says. “However, we need this type of work being done nationwide — all Americans deserve equity, not just those in Puget Sound, Arlington and Nashville.”
To Nevels, boards across the country are undisputedly becoming more and more diverse, and in turn, making better decisions to encourage and prioritize DEI initiatives within their organizations.
“When boards are reflective of the communities they serve, all of a sudden you are embracing the broadest notion of a stakeholder,” Nevels says. “Ultimately, every company that exists in the world is a consumer company, so the ripple effects cannot be understated. If you don’t comply with those strictures, you’re going to pay for it financially.”