Latino-Owned Small Businesses Deserve More Support

Diversity is Not an Afterthought

Corporate boardrooms typically look like the town from the film Footloose: white, stale, and stuck in their ways. For most Fortune 500 companies, diversity at the board level is just an afterthought. That’s because the conversation about diversity is usually posed as an ethical one. Having a diverse boardroom is “good” because diversity is inherently “good.” Of course, diversity for diversity’s sake is important, but that argument fails to resonate with business leaders who falsely believe that increased diversity leads to decreased revenue. I think there’s another case to be made for board diversity—the economic argument.

There are significant business advantages to having a board of directors that looks like the cast of Hamilton. In all seriousness, the modern business environment is facing unprecedented challenges. Consumers now expect to develop a relationship with each brand that extends far beyond the basic loyalty card. Corporations must communicate with buyers. The company that sells your paper towels probably has a Twitter page, and they have probably used that Twitter account to make political statements. People—especially millennials—want to be sure that they are spending money in a manner they deem to be socially responsible, and companies have to be prepared to respond to shifting public attitudes. Homogenous boardrooms are likely to find this very difficult.

 Before diving into the distinct advantages of board diversity, let’s take a look at the current rates of diversity in the boardrooms of Fortune 500 companies. Earlier this year, the Harvard Law School Forum on Corporate Governance and Financial Regulation published the “Missing Pieces Report,” a diversity census of women and minorities on Fortune 500 boards. The results were disheartening.

There are approximately 5,500 board seats across all Fortune 500 companies. Almost 70 percent of these seats are held by non-minority males. Minority women hold only 3.8 percent of all seats, and only two serve as chairman of the board. The statistics for Hispanic representation are especially disconcerting. Only 3.5 percent of all seats are held by Hispanics, and only 41 seats are held by Latinas. In the last five years, Hispanic representation has increased only 0.5 percent, the equivalent of six board seats.

I am confident that, sooner rather than later, nondiverse boardrooms just won’t cut it. Today’s companies have to think about how their goods and services fit into a wide range of lifestyles. In order to truly understand how to appeal to a broad consumer base, diverse leadership is a necessity. The Hispanic consumer base—and, therefore, Hispanic representation in the boardroom—is particularly important.

The 57.5 million Hispanics in the United States have a $1.7 trillion purchasing power, and the economic significance of the Hispanic community will continue to grow. One in four children born in the U.S. is Hispanic, making the Hispanic population the fastest growing demographic in America. If your company is not already actively marketing to the Hispanic community, you are missing out on a massive source of revenue. And, if you want to effectively market to Hispanic families, you will need more than one Hispanic on your board of directors. The Hispanic community is diverse in and of itself. Your board of directors also needs diversity within Hispanic representation to better understand the distinct countries, cultures, and political ideologies.

The importance of board diversity goes far beyond appealing to America’s fastest growing client base. Companies must also appeal to America’s fastest growing labor force. By 2024, 20 percent of the American workforce will be Hispanic. This statistic is especially significant considering a recent phenomenon that is devastating key industries: the labor shortage.

For the past decade, as our nation struggled to recover from the Great Recession, job creation was top of mind. In recent years, however, several industries have experienced a dramatic reversal. Many companies have more open jobs than applicants. For example, just last year, 3 million U.S. jobs in science, technology, engineering, and math (STEM) went unfilled. If STEM-based companies want to have a robust workforce tomorrow, they need to start Hispanic outreach today. According to Pew Research Center, only 9 percent of all jobs in STEM are filled by Hispanic employees. This is yet another missed opportunity.

Industries experiencing labor shortages are often failing to promote career opportunities in Hispanic communities. Some companies and membership organizations are starting to catch on. The American Petroleum Institute, for example, has acknowledged that the growing workforce demands of the energy industry necessitate employee diversification. The organization is deliberately marketing jobs in energy to Hispanic communities, encouraging students to pursue a STEM-based education. To my original point, this outreach is most effective when guided by Hispanic leadership on the board of directors.

Too often, corporate leaders refuse to diversify their boardrooms because they fear that diversity causes a disruption that will alter the business environment. They are absolutely correct. That is exactly why we need board diversity! Everyone brings unique backgrounds to the table which directly translate into new ideas. Disrupting the nondiverse boardroom has distinct economic advantages. In my experience, the boardrooms with the most diversity are always the most innovative, collaborative, and in-touch with consumers. That is why the USHCC emphasizes racial diversity and gender equity on our board of directors. Even the role of Chairman is shared between Carmen Castillo and Peter Villegas, who work together as co-chairs. By consciously emphasizing board diversity, we our preparing our organization to succeed.

America’s new fascination with corporate social responsibility—CSR for short—is not a fad. It’s a transformation of the way that the public interacts with companies. This is ultimately an opportunity to develop a brand that wins the trust and loyacc.lty of the public, and our country is fortunate to have a diverse general public. Today, diverse bshoard leadership is an economic advantage. Tomorrow, it will be an economic necessity. 

Fernand Fernandez served as Interim President and CEO of the USHCC.