Victor Arias Jr. the

CORPORATE BOARDS AND THE ROLE OF EXECUTIVE SEARCH FIRMS IN INCREASING LATINO REPRESENTATION

Victor Arias Jr. is one of the best-known friends for Latinos serving on Boards. Not only he has found some of them, but he has a reputation for advocating for diversity based in his extensive work in Non-Profit organizations and associations. For many years now, he has contributed to this edition highlighting some aspects of his own visions and findings.

Victor Arias Jr. THE CORPORATE BOARDS of 2021 are facing winds of unprecedented change. Many a board, rather than harnessing these winds to its benefit, is being battered by them, unable to keep up with the evolving standards of a society striving for a more perfect union. As they look to align with the country’s fluid demographics, some boards may need some help navigating the shifting demands of today’s marketplace. Fortunately, they need not look far for aid: executive search firms are equipped to serve as uniquely deft navigators in a sea experiencing much disruption. As pressure to reform is applied to corporations in the form of legislation, public advocacy, and institutional scrutiny, executive search firms and consultants can help lagging corporations navigate to a place of authenticity, transparency, innovation, and responsible governance.

An area of particular concern for many companies is board composition. With Latinos now comprising 18.7% of the total U.S. population, there is no excuse for major corporations’ not including Latino voices among their leadership. Yet the statistics depict a corporate landscape desperately out of sync. In August 2020, Latino directors made up only 2.2% of the boards of the publicly traded companies listed in the Russell 3000 Index. Between 2010 and 2020, the percentage of Latino directors (4%) in the top 200 companies in the S&P 500 remained static. Even in California, which has adopted board diversity legislation, among a sample of 678 public companies, only 29 new Latino directors were appointed between August 2020 and March 2021.

Such stasis is particularly confounding in light of the aforementioned winds of change. These winds, caused by several mutually reinforcing factors, are only gaining in strength. American society in 2021 is clamoring for corporate reform, and pressure on corporations to rejuvenate their boards is being exerted through multiple vectors: legislation, public advocacy, and institutional oversight.

However, boards, which already experienced little change with regard to Latino representation over the past 10 years, have further ossified during the pandemic. With the world in flux, nobody wanted to deal with board turnover. Now, as the pandemic inches towards its twilight, ensuring a representative composition of the boards of our corporate leaders is vital to our democracy’s flourishing—and with the help of executive search firms, this should not be a fantasy.

Search firms are uniquely equipped to serve as navigators for beleaguered corporate boards. At a time when a majority of board searches is conducted by boards themselves, search firms function as trusted advisors: we track market trends to ensure our clients stay abreast of the winds of change. We are able to expand the talent networks available to boards during their searches. Moreover, our inclusion in the search process results in three distinct advantages for the corporate client. (1) Credibility. A search firm’s involvement instantly lends credibility to a search process. By having an outside entity lead the search, the process becomes an independent affair, rather than a sometimes-perceived covert procedure carried out by the board itself behind closed doors. By involving a firm that purposefully specializes in diverse placements, such as Diversified Search Group (DSG), a corporation can immediately signal its desire for authentic transformation. (2) Transparency. Achieving transparency will be an additional benefit resulting from utilizing a search firm. The Nom/Gov committee can manage the criteria and process together with the search firm in reporting its activities in the proxy statement. This helps provide valuable information more openly to shareholders and interested parties. (3) Authenticity. Critically, a search firm knowledgeable about market and societal trends can provide an expanded talent network and increase the likelihood of a diverse board appointments, leading to greater innovation. These candidates must not be mere token board members— they are agents of evolution, and a search firm must make the benefits of this clear to the client. This can only be achieved with authentic and long-term relationships with the myriad of diverse communities.

In these ways, search firms also act as trusted advisors and advocates. Therefore, having appropriate consultants that are also representative of the desired changes to boards is effective. At DSG, we have been acting with purpose since our founding, pushing boards to expand their appetite for what is possible. A search firm can leverage its market knowledge and skillset not only to satisfy its client’s expectations, but to exceed them, enabling a corporate board to harness the winds that would otherwise toss it around an ever-shifting sea.

The winds of change are fierce, and they will not let up any time soon. Corporate leaders must keep up, both for their own good and the good of our democracy. Latino representation on corporate boards is vital to the continued blossoming of our economic and political systems. Executive search firms are standing by to make it happen.

*Victor Arias Jr. is Managing Partner at Diversified Search.