Monday, May 30, 2011

Black Board Members Disappear at the Largest US Companies While NYC Remains Preferred Headquarters

As our city continues to fight to keep its place as the preferred headquarters for our nation's largest companies, we see that the Boards of Directors of our nation's largest companies have been dramatically reducing their number of Black Directors in recent years.

The Role of the Board

Boards of Directors are the governing body of companies and play an enormously powerful role. Board members are elected by shareholders, but there is no higher authority within a company than the Board during the period between shareholder votes. Each company's Board selects the senior management of the company (including the CEO), establishes the compensation of the company's employees, sets the strategic direction for the company, evaluates and oversees the performance of the senior management of the company, and undertakes many other governance responsibilities, including the nomination of future Board members for approval by the shareholders.

Board service is lucrative. Members of the Boards of Fortune 500 companies each earn an average of more than $200,000 on an annual basis from their role (many companies pay each director more than $300,000 per year for Board service), despite the fact that the role requires a limited time commitment and does not preclude the Board member from serving on other company Boards or from holding a full-time job. In fact, most Board members are current or recently retired senior executives of large companies who are earning or who have earned until recently very high levels of compensation from their primary employers.

New York City is the Preferred Location for Company Headquarters

Boards of Directors decide where their companies are headquartered, and New York City is the most common headquarters for companies in the Fortune 500.

Of the 500 companies, 42 are headquartered in New York City. That number is nearly twice as high as the next highest city, and it is nearly four times as high as the third largest city. Our city continues to dominate the fight to be the home of the most large companies.

Attracting and retaining companies in New York City improves the New York City economy, promotes employment, ensures that our city's desires are reflected in Board rooms and in decision-making at the highest levels of companies, and helps make our city the best city in the world in which to live.

Though our city and the other cities providing homes for our country's largest companies are very diverse, Board of Directors of our country's largest companies exclude nearly all people of color and nearly all women. Unfortunately, the trend is toward less diversity instead of more diversity on company Boards.

Reduced Diversity on Boards of Directors

The Executive Leadership Council and other organizations recently issued a report analyzing trends and reality in the ethnic and gender make-up of Boards of Directors within our country's largest 100 and within our country's largest 500 companies. The results were highly troubling.

Though people of color represent 34% of the US population, people of color are only 10% of the population of Boards of Directors of Fortune 500 companies.

Perhaps more troubling is the trend. The Boards of the largest 100 US companies lost nearly half of their Black male Board members between 2004 and 2010, going from 93 Board seats in 2004 to 51 Board seats in 2010. The combined male and female numbers for Black Board members dropped from 120 in 2004 to 77 in 2010. In 2010, Black Board members represented less than five percent of all Board seats.

As our country becomes more diverse, the Boards of Directors of our country's companies must follow the same trend. Right now, the trend is moving in the opposite direction and creating a larger-than-ever disconnect between the populations working in, consuming products from, and being affected by our country's companies and the Boards of those companies.

Perhaps a sign of the challenges our country faces in curing its race-oriented realities is a new study that shows that white US residents believe that the primary victims of racism are white Americans and that racism against white Americans in the US today is more severe than racism against Black Americans. While these findings are shocking, they may help explain why Boards of Directors of US companies are aggressively reducing their Black populations in recent years. Boards may have the false impression that people of color have too much power in our US companies and may be trying to reduce that power by eliminating people of color from the Boards of US companies. Let us hope that the success of those efforts can be reversed.

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