Pledges for increased diversity in public companies have intensified since George Floyd’s death on Memorial Day. Chief executives have not only given to community efforts but also said they are listening and know they need to do better in integrating staffs.
Minnesota’s largest public companies have a long way to go when it comes to their leadership. Two of the 50 top-paid executives on this year’s Star Tribune list are people of color. Omar Ishrak of Medtronic retired in the spring, which leaves only Gary Maharaj of Eden Prairie-based Surmodics among active chief executives.
Four of the top-paid chief executives are women: Corie Barry of Best Buy, Beth Wozniak of nVent, Shelly Ibach of Sleep Number and Vicki Holt of Protolabs.
Diversity in C-suites and boards of directors is increasing but is nowhere near mirroring the population as a whole.
In Minnesota, the inclusion of people of color is moving even more slowly than representation of women, according to Rebecca Hawthorne, professor emeritus of organizational leadership at St. Catherine University.
“Generally speaking, trends have been improving incrementally throughout the last 12 years of the research; it has been very slow,” said Hawthorne, an author of the Minnesota Census of Women in Corporate Leadership.
On boards, representation is more visible. Nearly all of Minnesota’s public companies have at least one woman on their board of directors.
Minnesota’s largest public company, UnitedHealth Group — whose chief executive, David Wichmann, was the highest-paid executive last year with $52.1 million in compensation — lists four women, one of color, on its 17-person leadership team and three women, two of color, on its 10-member board of directors.
While some of the companies’ leadership is more diverse, UnitedHealth’s numbers are representative.
Plenty of evidence shows that companies that have more diverse voices on boards and in management do better financially. It’s the reason some large institutional investors have pushed diversity initiatives, including State Street, the world’s third-largest asset manager and a significant investor in nearly all of Minnesota’s largest public companies.
The calls for diversity often become louder after events such as George Floyd’s killing by Minneapolis police and the protests that have followed. Many companies across the country say his death — and those of other Black people by police — have spurred a more honest and robust conversation, from people of color speaking candidly about their experiences to internal petitions for more diversity.
The call for equal representation for women also has been yearslong, pushed by several national initiatives and groups like Catalyst.
St. Catherine has been studying the inclusion of women on the boards and in management of Minnesota public companies for 12 years. Its most recent report, the 2019 Minnesota Census of Women in Corporate Leadership, showed women held 22.9% of the available board positions at 76 Minnesota public companies, up from 14.2% in the first year of the study. The year also saw the largest net increase of female board members.
The study also showed women holding 22.7% of available executive-officer positions, the highest percentage in the 12 years, up from 15.5% in the first year of its census.
“There has been increased focus internationally, nationally and locally on issues of diversity, and gender diversity as one element of that in terms of corporate leadership, starting at the board level,” Hawthorne said. “That increased scrutiny has definitely made a difference.”
That pressure includes a mix of reporting requirements from governments and pressure from both investors and peer companies.
”When we have different bodies actually putting forth accountability, that does change the picture a bit,” Hawthorne said. “We really didn’t see that in 2008 when we started the research.”
Washington state this year passed legislation requiring the public companies there to have 25% of their board members be women by Jan. 1, 2022.
California has a similar mandate, and Michigan, New Jersey and Pennsylvania have been advancing such rules. The European Union has had rules on board diversity for years.
The Fearless Girl campaign by institutional shareholder State Street is more than a statue. The investment group identified 1,384 companies across the world without any women on their boards and pressed them to include more female candidates and directors. Since the launch of the campaign, the company said 681 companies have added directors who are women, including 495 in the United States.
Shareholder proposals on company proxies also have asked fellow shareholders to support more diversity on their boards and in CEO searches.
New York City Retirement Systems submitted a shareholder proposal this year at Berkshire Hathaway asking the company to adopt a “policy for improving board and top management diversity.”
It’s part of a larger effort announced earlier this year by New York City Retirement Systems to get companies to consider women and people of color for board positions and in CEO searches.
“In 2020, there’s simply no excuse for everyone in the boardroom to look the same. Companies are strongest when their boardrooms and C-suites reflect the diversity that is America,” said New York City Comptroller Scott Stringer in a news release about the initiative.
Three Minnesota companies have achieved 50-50 parity on their company boards: Best Buy, Sleep Number and Allete. All three also have female CEOs. (Bethany Owen of Allete is among five Minnesota female CEOs not among the top 50 paid chief executives in the state.)
Adding high-profile executives and board members, though, cannot be addressed in isolation.
The moves should address company culture, said Nakeisha Lewis, associate dean of undergraduate and master’s programs at the University of St. Thomas and diversity, equity and inclusion ambassador at its Opus College of Business.
“I think with any type of diversity and inclusion initiative, whether its C-suite based or looking at these boards, is really thinking through the culture of and the commitment to diversity,” Lewis said. “And the culture around what diversity means to that organization.”
Aside from Maharaj at Surmodics and Ishrak, who retired as CEO of Medtronic this spring but remains executive chairman, the only other CEO of color in Minnesota is CyberOptics’ Subodh Kulkarni, whose pay did not place him on the Star Tribune list. The Surmodics board is also one of two Minnesota public companies to be chaired by a woman, Susan Knight.
St. Catherine’s report gives Honor Roll distinction to companies having 20% or more female directors and 20% or more female executive officers, and Special Distinction recognition to companies with 30% or more in those roles.
NVent, managed out of St. Louis Park, has embraced diversity since its inception when it was spun out of Pentair in 2018. Beth Wozniak was selected to be CEO. Its leadership team has four women, including one person of color. The nine-member board has four women as well, including three people of color.
“We intentionally built inclusion and diversity into our culture from the start,“ said Lynnette Heath, nVent’s chief human resources officer. “We’re continuously working to integrate inclusion and diversity into all aspects of our business.”
Target Corp. and Deluxe Corp. made the Honor Roll for all 12 years of the report, even through board member and CEO turnover.
Only 17 of the state’s public companies in 2019 had a woman of color on their board, the same number as 2018.
Nationally, representation of women and minorities on Fortune 100 boards has increased from 28.8% in 2004 to 38.6% in 2018, according to Deloitte. Growth of minority appointments was slower: Minority men held 11.9% of the seats in 2004 and 13.7% in 2018. Women of color had 3% representation on boards in 2004 and 5.8% in 2018.
Percentages for diversity in the broader Fortune 500 companies were almost universally lower.
Cheryl Mayberry McKissack is one of the few women of color on a Minnesota board, serving for 20 years as a director of Shoreview-based Deluxe Corp. In August, she became chairwoman, the first woman or African American to lead the company’s board in its 105-year history.
But she said Deluxe is not done with diversity efforts. “There is still room for improvement for sure,” McKissack said
Deluxe has been very purposeful in its efforts to be and remain diversified in its leadership positions, she said.
Diversity initiatives, though, need to be throughout the organization both in recruitment and retention. Deluxe CEO Barry McCarthy said the company added a number of employee-resource groups in the last year for women, African Americans, veterans and LGBTQ employees.
“We 100% believe in hiring diversity at all levels of the organization,” McCarthy said. “If we allow ourselves to become an echo chamber, we can’t become a global organization.”
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