Online retail giant Amazon is attempting to make their corporate board a little more woke by addressing the critical equity and corporate governance issue through bringing on former Goldman Sachs executive Edith Cooper. She will serve as the company’s only Black board director, following Walgreens CEO Roz Brewer’s exit earlier this year. Where does the true value lie for companies willing to bring diversity of thought onto their boards?
The Breakdown You Need to Know: One-hundred forty-five S&P 500 companies have appointed at least one Black director to their board since last June, according to Latino Corporate Directors Association. For Amazon, Cooper’s addition to its board comes after the company faced backlash for having a lack of diversity in their executive positions. As part of her new board position, Cooper acquired 285 shares of Amazon, vesting in three annual installments between 2022 and 2024. Shares of the company are trading north of $3,200 each.
The business case for diversity has been made ad nauseam with very little real change. Currently, all the other 9 directors on Amazon’s board are white, seven are men and 2 are women. Shareholders had long wanted the board to adopt the “Rooney Rule,” which calls for the initial list of candidates chosen to include qualified women and minorities, according to Recode. Initially there was push back from board members when all the directors were white. “The Board believes that adoption of the policy requested by the proposal would not be an effective and prudent use of the Company’s time and resources,” Amazon said in a previous proxy statement.
Amazon has proven it can dramatically reshape whole, seemingly disconnected industries, so board diversity should be easy to figure out. Research from McKinsey and MSCI shows companies with higher levels of diversity at the board level are more likely to have strong financial performance and fewer instances of poor corporate governance. Bloomberg reported that Amazon has pledged to double the number of Black senior leaders by the end of the year and increase the number of female hires.
Prime Diversity Strategy: A report by Heidrick & Struggles projects that by 2022, appointments of women to board positions will reach 50% among the incoming class of new board members. While board appointments in the U.S. for people of color have also increased, unfortunately, 50% of new board members were current or former CEOs.
Board diversity has a long way to go because the reality is that 50% of new board members are former CEOs, along with 21% being current or former CFOs in 2019, according to the report. If people of color aren’t reaching the CEO or CFO level, how can they join boards?
Situational Awareness: A concerning development here is there isn’t a consensus across boardrooms on the value-add of diversity. A PwC survey of 900 board directors found 24% of directors don’t believe racial diversity has an impact on diversity of thought within boardrooms. However, there are institutions like the Nasdaq that are challenging the status quo by requiring its listed companies to make their boardrooms more diverse. The Nasdaq’s request with the Securities and Exchange Commission seeking the authority to mandate that companies have at least two diverse board members was recently approved.
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October 05, 2021 at 07:20PM
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Amazon Taps Former Goldman Sachs Executive As Its Only Black Board Member - Forbes
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