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E-MailRichard Socarides is Founder and CEO of Kozani Capital, LLC, a venture capital and corporate advisory firm, and serves on the Board of Advisors, and Fabrice Houdart is Executive Director at the Association of LGBTQ+ Corporate Directors. Related research from the Program on Corporate Governance includes Politics and gender in the executive suite (discussed on the Forum here) by Alma Cohen, Moshe Hazan, and David Weiss; Will Nasdaq’s Diversity Rules Harm Investors? (discussed on the Forum here) by Jesse M. Fried; and Duty and Diversity (discussed on the Forum here) by Chris Brummer and Leo E. Strine Jr.
Between February and April, 2023, the Association of LGBTQ+ Corporate Directors surveyed existing and aspiring LGBTQ+ Directors to better understand their representation in the US boardrooms. It revealed three clear causes of their exclusion — but also some easy fixes.
Does it matter?
A prevailing myth in the boardroom is that the sexual orientation and gender identity of corporate directors does not matter. While many directors have gained an understanding of the barriers facing women, racial or ethnic minorities to access the boardroom, some continue to perceive the topic of LGBTQ+ representation as irrelevant to governance questions.
In a recent Dilbert’s cartoon strips, the boss is concerned his ESG score would fall if “we open a new factory that adds CO2 to the atmosphere,” adding “but we can balance that out by adding more diversity to our board.” And when the other character asks, “how much CO2 do you plan to add?” the boss replies: “One non-binary board member’s worth.”
The least represented group in the Boardroom
LGBTQ+ exclusion from the boardroom is no joke, as even a cursory reading of NASDAQ- listed companies’ board composition matrixes disclosed this year (and a manual tally of representation in Fortune 500 Boards shows).
The Association of LGBTQ+ Corporate Directors estimates that on average, 0.6% of all seats of publicly listed companies are occupied by out LGBTQ+ persons – although LGBTQ+ people are estimated to represent about 5.6% of the US population (see February 2021, Gallup, LGBT Identification Rises to 5.6% in Latest U.S. Estimate). “Out,” means directors who have revealed or no longer conceal their sexual orientation or gender identity and who self-identify in the companies’ Board composition matrix.
With half a percentage of all seats, LGBTQ+ people are the most underrepresented group on U.S. boards, according to ISS Corporate Solutions, Inc. (ICS) figures, and Spencer Stuart, with Black directors at 11%, Asian directors at 6% and Latino directors at 5% in 2022.
Elements of explanation
So, what explains this abysmal lack of representation?
Earlier this year, the Association of LGBTQ+ Corporate Directors surveyed over 200 existing and aspiring LGBTQ+ Directors among its members to try and better understand the challenges they face in entering the boardroom.
Three main explanations emerged in the survey results:
The Lost Generation: LGBTQ+ people were highly discriminated against and regarded as inferior until recently. This thinking was particularly prevalent during the 1950s and 1960s, during which the generation of leaders currently in their 60s and 70s grew up (and which comprises the bulk of the directors in the boardroom, who came of age during this period). As a consequence, very few LGBTQ+ people made it to the top of business. In addition, the HIV epidemic decimated the following generation of gay men. In fact, 65% of all respondents to the survey were below the age of 54, a demographic divergence from other groups in the boardroom.
Gendered Industries: Not long ago, most out LGBTQ+ professionals were drawn to so-called gay-friendly industries, like entertainment or fashion. However, this expanded to include the law, finance, and tech over time. In the survey, LGBTQ+ respondents were overwhelmingly concentrated in Financial Services (20%), Tech (15%), Law/Consulting (15%), Healthcare (7%), and Media Creative (6%), while Education, Transport, Energy and Manufacturing lag at around 3% each. Similarly, 0% of all the existing LGBTQ+ director respondents reported sitting on the Board of an “industrial products” company (30% were in tech). This skewed concentration obviously has played a part in our underrepresentation.
The Network Gap: Until recently, many LGBTQ+ people have been excluded or shied away from mainstream professions. This continues to have ramifications in their access to informal networks which are the breeding ground for future directors. To caricature this point, if being on the PGA Boards or vacationing in Martha’s Vineyard are core to the Fortune 500 directors’ pipeline, many LGBTQ+ candidates are out of luck. When asked to give one word to describe what prevents them from securing a corporate board seat, LGBTQ+ candidates not currently serving on a board mostly mentioned networks and opportunities. And indeed, while only 3% of existing LGBTQ+ directors respondents serve on their nominating committee, 40% reported gaining their first seat because they knew someone there.
All these factors merge to make it difficult for LGBTQ+ talent to land a board seat. In fact, our survey for 61% of existing LGBTQ+ directors, this journey took more than one year (3 years or more for 20% or more).
Yet the talent exists.
The good news is that the LGBTQ+ board talent exists; 24% of respondents in the Association’s survey have had experience as a CEO; 60% had C-suite experience, and 59% had prior board experience (including non-profit and other boards). In addition, LGBTQ+ people already in the boardroom are “under boarded,” with 75% serving on only one Board compared to about 60% for all other directors. The Board values their contributions: 80% of surveyed existing LGBTQ+ directors elected “my voice is heard, and all views are acknowledged equally” when asked about challenges to be heard in the boardroom (see table below). This percentage falls to 65% for women respondents. The question, it seems, is access, not the quality of candidates.
What challenges do you face in having your voice heard during boardroom discussions? |
|
| Answer Choices | Responses |
| Other board members tend to dominate the discussion | 8.33% |
| Other board members tend to discount my opinions | 2.78% |
| Other board members tend to take credit for my insights | 0.00% |
| Board’s culture does not encourage all voices to be heard equally | 5.56% |
| Other | 2.78% |
| None—my voice is heard, and all views are acknowledged equally | 80.56% |
Elements of solutions
This cycle of exclusion is not inevitable.
Aspiring and existing LGBTQ+ candidates must practice targeted governance networking and seek visibility. The survey also gathered responses from recruiters, nominating and governance committee members, and corporate secretaries. They overwhelmingly reported “identifying LGBTQ+ candidates” as the main bottleneck to better representation. On a positive note, 60% of nom/gov committees respondents felt that the NASDAQ disclosure rule effective this year – which requires companies listed to publicly disclose diversity on their Board – could be a game-changer. Networking, visibility and making the talent pipeline easily accessible are where our Association plays a key role.
Boards and recruiters must also do some soul-searching: are they prolonging an underrepresentation that is the legacy of injustice? Are they depriving shareholders of valuable contributions by perpetuating the status quo?
