Despite the much applauded push for greater transparency and diversity, companies can choose to not meet the objective as long as they offer an explanation for why they didn’t. This opt-out option, as well as the fact that the objective could be met without electing a single person of color to a company’s board, is why diversity, equity and inclusion experts across the Capital Region feel Nasdaq’s proposal is the bare minimum, and risks possibly increasing whiteness on corporate boards.
“This proposal is basically the floor, not the ceiling,” said Kathleen McLean, the president of The McLean Group, a diversity consulting firm based in the Capital Region. “They can check that box tomorrow. They can get someone who is LGBTQ who is white, and then they get a white woman … They aren’t really keeping anyone’s feet to the fire in terms of this program.”
The benefits companies would reap from a more diverse board are well researched and proven, from being able to draw from a much broader talent pool to the critical role of supplying fresh perspectives in the market the company is in, to also helping the communities the companies serve. Companies that serve minority populations will be better equipped to serve them if their boards look like the people they are serving, McLean said.
“A person [of diverse background] can help you understand where you may be exposed because you haven’t engaged in that community before, it could help you not make a misstep in communications, it could help you with advertising,” said Yolanda Caldwell, the director of the women’s leadership institute at The College of Saint Rose.
Plug Power, a Latham-based, fuel-cell maker, has had one woman on its board, Maureen Helmer, since 2004. Johannes Minho Roth is of Korean descent, and has been on the board since 2013. Another woman, Kim Harriman, and Kyungyeol Song, a man from South Korea, were added to the board this year, according to a spokesperson from the company.
Helmer supports Nasdaq’s proposal and welcomes more diversity to a place where she’s used to being the only woman at the table.
“When you have a whole bunch of people in the room with a lot of similarities, they tend to become an echo chamber. Every time you add a new element to it I think your decisions are made richer by that,” Helmer said.
“I have a hard time envisioning what would be a rationale not to have those [diverse] individuals,” Helmer said about the explanation option for companies to take instead of meeting the diversity requirement.
Nasdaq developed the proposal because there currently is no standard for disclosing diversity statistics at the board level. “The diversity proposal seeks to provide a standardized disclosure framework in an effort to drive greater transparency around corporate governance, with the hope that the information will be made available to investors and other stakeholders,” said a Nasdaq spokesperson.
Trustco Bank supports the proposal and sees no problem implementing the diversity requirements if it should pass, according to Robert Leonard, the company’s executive vice president and chief risk officer. There are currently two women on the board; the specific racial identities of the board members Leonard said he couldn’t share.
Pioneer Bank, which has three women on its board, is also not concerned with meeting the proposal’s requirement. A spokesperson from the company also said they could not share the racial identities of their board members.
Thomas Amell, the president and chief executive officer of the bank who also serves as a board member, is not concerned about meeting the diversity objective.
“Any time there is an open position we are very thoughtful about making sure the candidate pool is a very diverse candidate pool before we make any hiring decisions,” said Amell.
“We just don’t have a lot of openings for our directors. Because of New York state banking laws, there are no term limits, they age out at age 75, we don’t have a lot of turn over,” said Amell, when describing a nuance his industry faces. He wasn’t sure if Pioneer would be asked to take additional actions because of the low turnover, and said he was waiting to see the proposal in its final form if and when approved by regulators.
Companies will need to network outside of their usual circles, said Mark Eagan, who heads the Capital Region Chamber of Commerce. “There are people out there that have that skill set they are looking for that also might be culturally diverse. It is the same process [that companies have used before to find board members]. They need to cast the net wider.”
Mechanical Technology Inc., an Albany-based public company listed on the Nasdaq that recently jumped into the crypto-currency mining business, has all male directors.
The company did not respond to questions from the Times Union about its board diversity plans.
Mechanical Technology, which mainly makes calibration machines for the aviation, semiconductor and other high-tech industries, is in the process of reincorporating in Nevada.
AngioDynamics, the Latham medical device maker, also declined to answer questions about the diversity of its board and how it plans to adhere to the proposed Nasdaq board diversity rules.
The company has three women on its eight-person board, which would make the company compliant with the Nasdaq’s proposed board diversity rule.
AngioDynamics does talk about the importance of board diversity in its proxy statement sent to shareholders for the company’s annual meeting. Like other public companies, AngioDynamics has a “nominating, compliance and corporate” governance committee that seeks new board members and makes recommendations on potential candidates for the board.
In its proxy, AngioDynamics says that the committee is charged with finding not only “qualified” board candidates but also “diverse” candidates such as women and minorities.
“A diverse board can lead to improved company performance by encouraging new ideas, expanding the knowledge base available to the board and management and fostering a boardroom environment and culture that promotes new perspectives, innovation and deliberation,” the AngioDynamics proxy states.
Arrow Financial Corp. of Glens Falls, the parent company of Glens Falls National Bank and Saratoga National Bank, has two women on its board, and a third woman is up for election to the board at the company’s annual meeting next month.
Banks are already subject to strict lending laws that prohibit discrimination based on race and other factors, and so banks, which have physical offices in neighborhoods all across their service territory, already have extremely diverse workforces and boards.
Blake Jones, director of marketing for Arrow, said the financial services and banking company has met the criteria for the proposed Nasdaq rules for more than two decades and has had a woman on its board for more than 30 years.
“Our company is committed to continuing to advance board diversity, with or without Nasdaq requirements, because different backgrounds, perspectives and skillsets strengthen corporate governance and ensure we reflect the communities we serve,” Jones said.
General Electric, Regeneron, and IBM are major employers in the area that publicly disclose the racial identity of their board members and have more than one woman and one ethnically diverse member on their boards. GE and IBM are both listed on the New York Stock Exchange.
The New York Stock Exchange does not have a diversity objective for the companies listed on its market, but it does have an advisory council that is committed to helping companies find diverse board members.
Regeneron is listed on Nasdaq and has three women directors, two of whom are ethnically diverse, as well as two men who are ethnically diverse, according to the company’s proxy statement.
General Electric has four women on its board of directors, Risa Lavizzo-Mourey is a woman identified on GE’s website as ethnically diverse. Francisco D’Souza is a male also identified on the website as ethnically diverse. IBM has three diverse directors, including two women, on its board, according to the company’s proxy statement.
Diversity experts warn that companies should not only adopt Nasdaq’s diversity objective because it is mandated and benefits the company. Experts stress that if this is the intent behind the selection, the diverse member may not be treated right, feel marginalized, and in turn won’t actually be contributing to the board.
“What you want to be mindful about is that this proposal isn’t promoting tokenism,” said Alfredo Medina, Jr., the executive director for public engagement and associate director for the office of diversity and inclusion at the University at Albany. “That you aren’t going around and just appointing a woman or a person of color on your board without giving them a voice, without being valued for their opinions and perspectives and they basically become window dressing.”
This often happens with search committees, said Medina. “When they are on these boards they are often silenced or they are not looked to for input,” said Medina. “This proposal could end up doing greater harm to a company if individuals are just elected to be on the board but then [board members] are not finding ways to ensure that those voices are heard and that they matter as part of the decisions the board is making.”
Caldwell, of The College of Saint Rose, was trained by Deloitte in how to prepare for board service. She encourages companies to invest in education for potential board members. “There needs to be a commitment to train individuals who are new to be educated about how to serve on a board,” Caldwell said.
During the pandemic, organizations started to realize that some of their board members were “boarded up,” said Caldwell, which means they serve on multiple boards at once. “Companies are going to have to accept first time board members. They can’t continue to tap the same well,” Caldwell said.
Caldwell is also hopeful that the proposal would help encourage people of color to stay in the area longer because the opportunity to serve on a board will help them with their career path and longevity in the area by serving in these roles.
One concern that Caldwell raised is that some people might not be ready to disclose if they are LGBTQ plus yet, however the proposal would not require companies to report any information about board of directors’ racial identity or sexual orientation unless the board member self disclosed it to the company.
Despite the criticism and caution, diversity experts applaud Nasdaq for making one step in the right direction and hope there will be progress in the long run.
“Hopefully we will get to the point someday where boards are so diverse that someone doesn’t have to wag their finger to say go out and get your diverse background,” said Helmer, from Plug Power’s board.
“We believe that our proposed listing rule is one step in what is definitely a broader journey to reach inclusive representation,” said a Nasdaq spokesperson.
The proposal is currently open to a comment period where community organizations, Nasdaq companies, legislators and lawmakers, and advocacy groups provided their feedback. Eighty-five percent of substantive letters were supportive of the proposal— including one from state Comptroller Thomas P. DiNapoli.
The SEC has requested more time to make a decision on the proposal. The final decision might not come until August.
“Whether Nasdaq or not it is just a sound business decision for them to have diverse backgrounds around their tables,” Eagan said.
Larry Rulison contributed to this story.
An earlier version of this story incorrectly stated Nasdaq’s proposal requirements. A company would only be required to report diversity data that was self disclosed by board members.
This content was originally published here.