As one of Florida’s largest private employers and a big donor to local politicians, The Walt Disney Co. generally has a lot to say about legislation in the Sunshine State.
But when its chief executive tried to remain silent about the divisive bill concerning the teaching of sexual orientation or gender identity in Florida schools, employees called him out. CEO Bob Chapek ended up protesting the bill to Florida Gov. Ron DeSantis, suspending his company’s political giving in the state and publishing a personal apology.
Chapek’s about-face is a good example of how change occurs at big companies. Whatever the merits of this particular bill, and Chapek’s apology infuriated many of its supporters, most CEOs now recognize the power of employees, customers and other stakeholders in forcing corporations to uphold their stated values. And so they should.
Importantly, no law or regulation required Chapek to step up. None was needed, which is the point we emphasized when confronted several years ago with a clumsy attempt in Springfield to force Illinois companies to diversify their boardrooms.
This page strongly opposed a bill in the General Assembly that at the time would have required at least one woman, one African American and one Latino on the boards of public companies based in Illinois.
Fortunately, the bill was modified to require those companies only to disclose the demographics of their boards and executive ranks (which many were doing already) and to direct the University of Illinois to publish an annual report on the state of corporate diversity.
This year’s report is out, and the 97 corporations filing the paperwork generally reported some progress. As it stands, 80% employ two or more women directors and 50% have two or more nonwhite directors. Just two companies have all-male boards, and fewer than 20% are all-white.
Good enough? No. We want to see much more progress, and there’s reason to believe it’s coming.
In the wake of social justice protests, many companies that hadn’t previously done so were moved to adopt diversity as a corporate value and set goals to become more diverse at all levels. That matters, because, as in the case of Disney, companies are finding it more difficult to say one thing and do another.
This is proxy season, the time of year when shareholders review the performance of public companies and vote on issues at corporate annual meetings. It’s also when those companies own up to their results — financial and otherwise, including their progress on Environmental, Social and Governance issues.
Among the most influential stakeholders are institutions that control vast amounts of investment capital. BlackRock Chairman Larry Fink, for instance, has made it his business to pressure companies he invests in to address climate change. If they have no plan for adapting to the reality of global warming, BlackRock may very well decide to direct its megabucks elsewhere.
That’s the kind of pressure CEOs can’t ignore.
Similar pressure is building for increased diversity. For years, the key argument against diversity was financial. Rigorous, peer-reviewed research does not convincingly establish a causal relationship between diversity and making more money. Studies on the topic show that the presence of women board members, for instance, does not automatically improve, or worsen, financial performance, despite the efforts of advocates to prove the opposite.
There are, however, good business reasons to push for diversity, rooted in fairness, equal opportunity and, especially, corporate reputation.
Good reputations are difficult to build and fragile to maintain. Failing to address social responsibilities can damage them, making it harder to attract the best job candidates, charge a premium in the marketplace and build loyalty among customers.
Improving board diversity should go beyond hiring a few token directors to meet a superficial quota. Done right, making progress in such a high-profile setting heralds a broader cultural shift throughout a company.
The stereotypical corporate boardroom full of white, male, old fogies making secretive decisions by the light of smoldering cigars is almost a thing of the past. Let’s be patient enough to allow real change to take root.
