2017 will be remembered for many reasons, including but not limited to an unprecedented political climate, a particularly active hurricane season and multiple reminders that cybersecurity will continue to be the No. 1 risk in the public and private sectors.
In corporate governance specifically, however, 2017 will be remembered as the year some of the largest institutional investors took a stand on board diversity. In March, State Street Global Advisors made a loud-and-clear statement with its “Fearless Girl” statue, representing the fund’s dedication to ensuring that its portfolio companies are committed to gender diversity. Less publicly, but equally effectively, BlackRock noted in its mid-year investment stewardship report that the investor had supported a handful of shareholder proposals requesting policies on board diversity.
Both firms put their mouths where their money is by voting against directors on boards that were not actively addressing diversity. While these two are certainly not the only large investors to make these kinds of statements, they engaged in representative actions, sending signals to the corporate governance world.
The question is where boards go from here. There are countless research reports that point to the fact that diversity drives better business results. There are countless excuses as to why there is not more diversity on boards, the most popular being that there aren’t enough qualified candidates available to fill seats. So how can boards tap into the various pipelines for diverse directors that are being built and, possibly more of a challenge, how can candidates access the right pipelines that will provide avenues to the opportunities they’re seeking?
Equilar had the opportunity to host the architects of a program in the National Football League that has seen success in this regard. In 2002, the NFL introduced a mandatory policy that all its 32 organizations were required to interview minority candidates for open head coaching and front office positions. Also known as the “Rooney Rule”—named for former Pittsburgh Steelers owner Dan Rooney—the policy has become well-known and cited as a successful mechanism to increase the pipeline of diverse professionals in business.
At the Board Leadership Forum in New York City, co-hosted by Nasdaq, Equilar was joined by Jim Rooney, son of the late Dan Rooney and Founder of FirstLink Research Analytics, Paul Tagliabue, former NFL Commissioner (1989–2006), Robert Gulliver, Chief Human Resources Officer for the NFL, and Capricia Penavic Marshall, Ambassador-in-Residence, Adrienne Arsht Latin America Center, and Former Chief of Protocol of the United States during the Obama administration (2009–2013).
The responses below are based on the event’s formal discussion and an exclusive interview with C-Suite following the panel.
Equilar: What was the genesis of the “Rooney Rule,” and what led to its implementation?
Commissioner Paul Tagliabue: By 1996, there had been just four head coaches of color in the NFL, and three of those coaches were on teams with new owners. That prompted me to ask whether there was an unhealthy cultural issue in the league, as these new owners’ view of talent transcended the NFL. They had brought in outside executives as well as three African-American head coaches, both of which were rare at the time.
1997 became a landmark year for the NFL’s diversity policies. This was all happening parallel to the growth of the league. In 1970, total revenue was $130 million, which had grown to $900 million by the time I started in 1989. By 2006, when I left, it was $6 billion. So we were in this period of tremendous growth, and looking at it in context with the total business environment, we were looking at how we fit into the larger corporate universe, where the mantra was globalization, innovation and talent. I took that to heart. We recognized that diversity had to be a part of that. Discussions intensified in 1996 and 1997 as we gathered together all the owners to try and do something about this, and by 2002 we were not making the progress with head coaches, assistant coaches and front office staff, so I decided we had to do something mandatory.
In the NFL, the Commissioner has no power if he’s not persuasive, and ultimately I had to have the owners approve. Dan Rooney was the obvious person to me to help build consensus as a leader in talent development, organizational development and diversity.
Jim, what can you tell us about your father’s legacy and why Commissioner Tagliabue thought to reach out to him?
Jim Rooney: The Steelers are the only major sports franchise to have three straight coaches in that position for a minimum of 10 years. That’s just one aspect of the organization’s culture that reflects its overall philosophy. As another example, in the 1960s, the team hired Bill Nunn to scout the historically black colleges, which led to bringing on some of the best players of their era in the 1970s. Chuck Knoll, our head coach who shared Dan Rooney’s vision and values, started Joe Gilliam in 1974 at quarterback, the first African-American to start in the NFL at that position. That built a level of trust between the players and the organization. The team gained a true competitive advantage because of a commitment to inclusion, and all of that laid the foundation for the Rooney Rule.
“[The Steelers] gained a true competitive advantage because of a commitment to inclusion, and all of that laid the foundation for the Rooney Rule.”
Jim Rooney, son of the late Dan Rooney and Founder of FirstLink Research Analytics
Since the Rooney Rule has been in effect, what has been its influence, and what do you see as its future?
Robert Gulliver: The Rooney Rule has been the NFL’s most significant export besides the game itself. When Commissioner Tagilabue was framing this 15 years ago, much of the dialogue was how to develop a process for stewardship and how to take the success and build on it.
In that context there are three questions to ask: Is this still working, is it still relevant, and how can we make it better? The stats tell us it is working. While there is still an underrepresentation of minority head coaches, there had been six in the modern era before the Rooney Rule. Since 2002, there have been 17.
The question of whether it’s still relevant can be answered with a resounding yes—I’d argue that it’s more relevant than ever. Internally, it’s become core to the NFL and our culture, but we’re also seeing it extend to other not-for-profits adopting their own versions.
Answering the question of how to make it better and build upon its success is dependent on the pipeline. It’s one thing to say that you have to interview a certain type of candidate, but it’s another to have a critical mass of candidates at the ready. So we’re focused on helping identify the next generation of diverse talent.
Tagliabue: When we adopted this, we got pushback and objections saying it would lead to hiring less qualified people. We had to address that, because no owner of a sports team—NFL or otherwise—wants to take someone who is not the best for the position. The Rooney Rule doesn’t require you to hire anyone, but it does require you to create a competitive framework for evaluating multiple people based on merit. That’s the key. In surveying teams before adopting the rule, we found that the system existing before was not a merit-based system—it involved recycling talent that had not fully succeeded. So new talent could not get into this old boys’ network at any level. I’ll emphasize that aspect of it. The Rooney Rule doesn’t impose quotas, but it requires you to interview a lot of people and broaden your perspective of the candidate pool.
“The Rooney Rule doesn’t require you to hire anyone, but it does require you to create a competitive framework for evaluating multiple people based on merit.”
Paul Tagliabue, former NFL Commissioner (1989–2006)
Capricia Penavic Marshall: The crux of the Rooney Rule is that there are certain frailties within our societal structure, and it’s imperative our leadership address those issues. There is a sense that the government is not following those rules. When we engage with delegations all over the world, we have to understand differences and appreciate them and we need to understand different ways to engage to be effective. There is a synergy in what I did as Chief of Protocol and the Rooney Rule in that we were working to influence a behavioral change and provide guidance, advice and structure around that.
Companies who have chosen to address these issues gain a competitive edge by having diverse perspectives. You can get behind if you don’t address these issues that are happening at a societal level. The population is 51% women, African-Americans represent about 14%, and Latinos account for around 18%. Having people within your industries who understand those perspectives and how to effectively engage those audiences is smart business.
Those are all excellent points, as the Rooney Rule is not only about increasing diversity at head coaching and front office positions in a vacuum, but also about the pipeline, and I think that’s one of the most salient topics that relates to the boardroom. When you look at board diversity, it’s not only a problem of board diversity, it’s a problem of diversity coming all the way up the ladder. People say there are not enough qualified female candidates, but that’s possibly because they’re only looking at CEOs and CFOs and there are not a lot of females in those positions.
Robert, turning the conversation to the NFL as an organization, how have you implemented this internally, specifically with regards to gender diversity? That’s an interesting aspect that a lot of people may not think about considering the NFL’s players are exclusively male, and at this point, its head coaches are as well.
Gulliver: Since 45% of our fans are women, it only makes natural business sense for us to be very focused on the importance of gender diversity. Two Super Bowls ago, Commissioner Goodell took the step to formally expand the Rooney Rule to include gender diversity for executive level positions at the league office. That created an additional element of urgency relevant to our efforts, and we’re very pleased with the results. We have several key roles in our revenue-generating businesses run by women, including our media business and our sponsorship and consumer products business. The Rooney Rule is great in its simplicity in that there are no expectations for outcomes. By doing the reps, you get better.
I like that you started with that statistic, because it’s one of the key things diversity advocates in corporate governance champion as well. Shareholders, customers and employees are diverse groups of people, and companies that represent those constituents perform better. Capricia, I’m sure you saw that in your government work as well. How have you seen effective pipelines for diverse talent built?
Penavic Marshall: As a young woman, I felt privileged to be mentored by a boss that invested in women—in teaching certain talents, how to create your own network and how to be heard within the boardroom. Even the White House, which we felt had advanced on diversity issues, was still far behind. Oftentimes I’d be the only woman sitting in a meeting.
Any rule you create has to incorporate a larger process that helps women and minorities access the pipeline. And then you have to understand how that translates to the corporate world. Having tools to address this is critical.
The Rooney Rule has an amazing legacy and is clearly successful in the NFL, but how does this relate to boards, and how can they implement such a process for themselves?
Tagliabue: The board has to work with the CEO and the senior team to do a self-evaluation, and the committee on directors has to pinpoint whether they have board members who can really add value, assess issues and create policies to address those issues. When you work within a closed network, you end up overrating an existing talent pool and missing the rest of the talent pool. You have to redefine the metrics, clearly define the skill sets that go into success and then factor that into the decision making process. That allows you to identify talent on the basis of merit and performance, not on anything else.
Penavic Marshall: You have to have diverse tool sets. People come in with a different perspective, and whether it’s on a board in a corporation or as a head coach, the ability to see multiple perspectives makes you relateable. It enriches the process and then you can address a larger audience.
Gulliver: It all goes back to the business case for diversity—in our case the diversity of our fan base—and being able to come up with new ideas to meet the needs of your customers. You have to have diverse thinking represented at all levels of the business.
If you’re trying to implement something, it’s inevitable that you’re going to get pushback. What are some strategies on finding those advocates—like Dan Rooney—to help you push forward?
Tagliabue: You have to recognize as the CEO you can’t do everything yourself, and you have to be very clear about what you are going to do and what you are going to trust others to do. That includes senior executives, the board and its committees. At the NFL, I chose owners to serve on board committees and found if I made the right choices, I was able to address the issues that arose. And you’ll also be able to address policy changes in the recommendations that come forth to those committees. That’s important.
Building consensus means asking a lot of questions and understanding why there are different points of view and why there may be disagreements on any particular issues. You have to understand why someone is against something in order to try to reach an agreement.
In league meetings, you need 24 votes (out of 32) in favor of anything. On most issues we’d start with 23. Three would be opposed for one reason, three for the opposite, and three for no reason. We were always one short of getting something done. It might take an hour, it might take three days, but we always needed that last vote. It involves leveraging not only your own relationships but also those that the others have.
“In surveying teams before adopting the rule, we found that the system existing before was not a merit-based system—it involved recycling talent that had not fully succeeded.”
Rooney: As I’m recognizing and remembering my father, I’m thinking of what he would like about this panel and what he would advocate to boards based on this panel. I initially had some vision of it, but how it worked represented that even better than I could imagine.
He was a big-picture guy, but he loved the process and always talked about the process. He’d say this is where we’re going and lay out how we were going to get there. Capricia talked about cultural diplomacy and global thinking, and that was core to his philosophy. It was never just about the Steelers making money, or even winning. He never talked about winning, but he talked about us being great, and that winning would be an outcome of being great.
So that global perspective applies to asking the question: What do you want on your board? A board helps your organization do what they need to do, whether it’s aligning with innovation or taking care of the bottom line in some way. And diversity allows you to do that better because it allows you to relate to your constituents in a meaningful way.
Dan Marcec is the editor-in-chief of C-Suite and the director of content at Equilar. He can be reached at email@example.com.