Nov 152008
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Minority corporate directors play an important role in leading companies. Each minority board member brings something different to the board. Hiring committees should consider the skills and background the director brings to the board. Is should also assess how the prospective director’s leadership style will affect board dynamics. As with many other high-level positions, increases in minority representation in the boardroom has been slow, but it is improving as minority members prove their value.

Many companies tend to look for new board members at the highest levels of corporate management. They often overlook talent and energy by only considering such a small sample. Active CEO’s are already engaged in running their own company and tend to serve on boards they feel will enhance their personal growth and development. Often, CEO’s delegate their board membership responsibilities to others for overseeing compliance with important issues such as the Sarbanes-Oxley regulation. While CEO’s understand the overall concept of large issues, often the next tier of corporate leadership understands the technical aspects of such massive issues and can provide effective leadership to solve such issues.

Boards should also consider the assistance minority leadership offers in attracting minority management talent. A company trying to sell to women needs the perspective only another women can bring. A company trying to recruit a top African-American executive will have a better opportunity if the candidate sees other African-American executives in corporate leadership. Companies planning to sell in the growing Hispanic market should look for Hispanic talent to add to the strategic plan of marketing and selling in this sector of the economy. China has offered many challenges to companies seeking to enter the most populous economy on earth. The companies most successful have been those with senior level management and board members from the Chinese culture.

A board of directors should never hire based simply on race or gender. Boards should direct their hiring committee or succession committee to conduct an assessment of the talent available to the board, and look for skills in minority board members that will improve the level of talent and broaden the talent available to the serve the needs of the company. Good corporate governance will employ a strategic plan for assessment of the talent needs and the representation of minorities needed to fill the talent.

An assessment by Catalyst conducted in 2007 found that Fortune 500 companies with the highest representation of female directors had the best corporate financial performance in many key areas. The board of directors has the prime responsibility of maximizing the return to shareholders. Some of the measures reported by Catalyst were:

  • Return on equity: On average, companies with the highest percentage of female directors outperformed the least by 53 percent
  • Return on sales: On average, companies with the highest percentage of female directors out performed the least by 43 percent
  • Return on capital: On average, companies with the highest percentage of female directors outperformed the least by 66 percent

Succession committees and hiring committees should take note of such assessments. Boards of directors conducting a deep assessment of the company’s leadership should identify key minority talent and foster their personal growth and leadership development. Boards with strategies to retain minority talent have a much easier time recruiting minority talent as well.

Sarbanes-Oxley and other regulations require boards to assess boards and to plan for orderly succession of corporate leadership. Committees charged with conducting board assessments and planning for the future board leadership should include as part of their strategic plan the identification of minority talent and the active recruitment of the best minority talent that fills in gaps in expertise on their board of directors.

If you want to learn more about managing and balancing board composition or talk about your current situation, send me an e-mail and we will arrange a time.

© Dr. Earl R. Smith II

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