Over the last year, the world has faced several challenges inflicted by the COVID-19 pandemic. These developments further heightened the focus around environmental, social and governance (ESG) issues. Among the many topics that fall under the ESG umbrella, diversity is one that captured the spotlight in 2020.
While COVID-19 saturated the headlines in 2020, various social movements around racial inequalities gained tremendous momentum. As the spotlight was cast at a national level, the topic began to find its way more at a micro level within companies. Of course, since diversity starts at the top of an organization, the focus has primarily been on boards. In October 2020, California Governor Gavin Newsom signed a bill, the first of its kind, that requires publicly traded companies headquartered in the state to have at least one board member from an under-represented community by the end of 2021. Other states are expected to follow suit.
Nonetheless, diversity is sure to be a hot-button topic for years to come. This segment features data pertaining to the composition of boardrooms within the Equilar 500, the 500 largest U.S. companies by revenue. Overall, 18.4% of Equilar 500 directors have backgrounds from underrepresented minority groups. The highest prevalence of ethnically diverse directors are Black/African American, representing 8.3% of Equilar 500 directors. On the other hand, those directors with a Middle Eastern/North African background are least represented at 0.5%.
As racial equality continues to be a topic of discussion in 2021 and beyond, diversity will become more critical. Boards and executive management teams that address this timely topic will certainly have the upper hand when facing shareholders and other key stakeholders.