Lack of Indigenous representation on US corporate boards
PHOENIX (AP) — Mary Smith had a plan: She would serve as a member of a company board of directors. She already had the resume. Smith is an attorney and was the chief executive officer of the US Indian Health Service, a $6 billion company.
“I think most people aren’t going to get a call out of the blue,” she said. “You have to put yourself out there so people know you want to be on a company board because there are recruiters who recruit for company boards. But the vast majority of board seats are still filled through networking.”
Smith’s planning was deliberate. She “very consciously treated it like a full-time job”. This included learning about corporate governance and board responsibilities, as well as developing a ‘board biography’ to highlight traits board members are looking for, such as: B. Regulatory experience. She also hired coaches to sharpen her pitch.
“I didn’t want to look back and be like, ‘Oh, I wish I had done X, Y, or Z.'”
Smith has carved out a seat for himself at a table where few Indigenous people have been invited in the past.
About 4,000 companies trade on Wall Street through the New York Stock Exchange, or NASDAQ. Each of them has professional board members who are responsible for the running of the company. The number of American Indians and Alaska Natives represented on these boards is far less than one-tenth of 1%.
Smith, a citizen of the Cherokee Nation, is now a member of the Board of Directors of PTC Therapeutics Inc., a publicly traded global biopharmaceutical company focused on “the discovery, development and commercialization of clinically differentiated medicines that benefit patients living with rare diseases.”
She receives an executive fee of $30,659, according to the company’s report with the Securities and Exchange Commission. She also receives options and stock based on the company’s success, which can be worth hundreds of thousands of dollars.
Smith says there’s more to serving on a board than showing up to four meetings a year.
“It sounds like an easy gig, but no, it’s actually a lot of work,” she said. There are documents that need to be checked, a duty of care and fiduciary duty. A bad decision could lead to liability.
“So, yes, you must be very thoughtful and fulfill your fiduciary duties to the company.”
According to management consultancy Spencer Stuart and their annual report index, the average total compensation for a board seat is $312,279. This average reflects actual director compensation, including the voluntary and usually temporary pay cuts some boards took during the peak of the pandemic. More than three quarters of directors grant stock awards to directors in addition to compensation.
Serving on a corporate board is a good thing, but there are a few prominent Indigenous board members. Cherie Brandt is a board member of TD Bank in Toronto. She is both Mohawk of Mohawks of the Bay of Quinte and Ojibway of Wiikwemkoong Unceded Indian Reserve. She was appointed last August. Kathy Hannan, Ho Chunk, works at Otis Elevator and Annaly Capital Management.
A number of Aborigines also serve on regional bank boards, utility companies and throughout the energy sector.
Overall, the data shows movement related to diversity. The 2021 US Spencer Stuart Board Index shows that white directors have declined slightly in 2021, but still make up eight out of 10 board members, and six of the 10 are white males.
The index also found that directors from historically underrepresented groups accounted for 72% of all new directors at S&P 500 companies, up from 59% in 2020. The proportion of women rose to 30% of all S&P 500 directors.
“Despite a record number of new directors from historically underrepresented groups, the overall representation of some demographic groups on the boards of the S&P 500 lags behind their representation in the US population,” said Spencer Stuart. “For example, although 42% of the U.S. population identifies as African American, Hispanic, Asian, Native American/Alaska Indian, or mixed race, these groups make up only 21% of the directors of the S&P 500.”
The 6th edition of the “Missing Pieces Report: The Board Diversity Census” by accounting firm Deloitte and the Alliance for Board Diversity is a multi-year study that found that public companies are making slow progress in appointing diverse boards. The Allianz goal is for women and minorities to make up 40% of all company board seats, up from 17.5% in 2021.
And the thing is, the Alliance for Board Diversity says, based on the skills of new board members, that women and people of color are more likely than white men to have experience with “corporate sustainability and socially responsible investing, government, sales and marketing, and technology in the workplace on their boards. “
In other words, if the new framework is sustainability, specifically environmental, social, governance or ESG, then people of color who are appointed to boards are more prepared for the task at hand.
Native Americans are largely absent from corporate governance.
The numbers are startling. According to Deloitte, less than a tenth of 1% of all company board members are in the “Other” category. There are so few Indigenous people on corporate boardrooms that there isn’t even a measurement. (The Spencer Stuart Board Index simply reports less than 1% for representation of Native Americans and Alaskans.)
There are some initiatives trying to change that. The first comes from the National Association of Securities Dealers Automated Quotations, or NASDAQ, a computerized stock trading system. A Board Diversity Rule was introduced in August 2021, requiring companies to use a standard template for board representation and “have or explain why they do not have at least two different directors”.
And in California, a 2020 law requires companies headquartered in the state to have one to three board members who identify themselves as members of an “underrepresented community” that includes Asian, Black, Hispanic, Native American and Pacific Islander people as well as those who are gay, lesbian, bisexual or transgender. The law allowed the Secretary of State to fine companies that failed to comply. Then, in May 2022, a Los Angeles court overturned the law as unconstitutional; his application is suspended pending the completion of the appeals process.
But companies act anyway. Four years ago, almost a third of the boards of public companies in California were made up entirely of men. Today, it’s less than 2%, according to the most recent report from the California Partners Project. This year, two-thirds of California public companies have three or more women directors — six times as many as in 2018.
“I think it’s very important to have representation, especially from the Native American community,” said Rep. James Ramos, D-San Bernardino. Ramos is a citizen of the Serrano/Cahuilla tribe and the first California Indian to be elected to the state assembly. “It serves two distinct purposes, first, to ensure that not only are California Natives represented, but that the nation’s Natives have a voice when it comes to advancing the economy of our community, our state and our nation.”
Ramos said it was also ambitious and demonstrating chances.
“When you compile statistics and data, we hear it all the time: Latino population, right? statistics and data. African American, statistics and data. And yet we are talking about people of color and diversity and we don’t even mention Native Americans or even California Indians in general.”
There were a significant number of Native Americans who served on philanthropic bodies.
Sherry Salway Black, Oglala Lakota, has served on a number of such boards and says she has often heard the tale of only one or two Native Americans serving on boards of private foundations. So she conducted a “quick and dirty” survey and found at least 28 Aboriginal people serving in 13 private foundations and nine Aboriginal people on the boards of seven community foundations.
One area where there is much Native Board action is in community development financial institutions, which are mission-driven and focused on community building and access to capital. There are dozens of such credit institutions, and it was especially important in the agricultural sector.
Carla Fredericks, Mandan, Hidatsa and Arikara, is Chief Executive Officer of The Christensen Fund, a $300 million foundation. She said it’s important to be deliberate when appointing board members.
“It’s long overdue,” she said. “Even though we have tried to add additional board members to our board, we are certainly aware that while there is incredible leadership experience in the Indian country, not much board experience that people have. So it’s really important to build that.”
Fredericks said it can be a self-perpetuating problem when boards require prior experience but don’t explore translatable experience.
“We looked at the candidates from a broader perspective,” Fredericks said. “I also think we had a really intentional lens to recruit tribal peoples to the board.”
ICT has compiled a list of Indigenous representation on corporate boards, government-sponsored corporations, university boards and large non-profit organizations that illustrates the large talent pool that already exists. For example, when members of Congress retire or even lose an election, they are often sought after as board members. The process is not the same for tribal leaders who have run multi-million dollar corporations, especially for large tribes like the Navajo Nation or the Cherokee Nation.
Part of this equation is how boards recruit new members. The Missing Pieces report, a 2021 census compiled by the Massachusetts Institute of Technology’s Sloan School of Management, says there are immediate impacts after women and minorities are placed in key positions, such as on the nominating committee. “After two years, those boards are more likely to have a higher proportion of women or minorities.”
Mary Smith, a Cherokee citizen on the PTC Therapeutics Board of Directors, said there was a need to expand the network beyond past CEOs to include other areas of experience, such as tribal leadership.
“I would like to see more Indians on boards. And I hope that some people will start saying, ‘Yes, I could do that.’ And then try to put yourself out there to be on the radar,” she said. “People in the native community have a lot to contribute to corporate boards.”
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