The board’s role in integrating DE&I into company business

Experience has taught companies that DE&I (diversity, equity & inclusion) is critical to their success in myriad ways, and there is growing evidence of consensus around its importance. At the 2021 Society for Corporate Governance National Conference, SEC commissioner Allison Herren Lee said, “Historically many ESG issues were seen as not within the purview of the board of directors. Those days are over… [The] connection between ESG and the interest of shareholders has become evident.”

This is also evident in the way we talk about these issues. The original umbrella term, “corporate social responsibility,” evolved to ESG (environment, social and governance) is more aligned to the language of business, reflecting an understanding that these nonfinancial factors are really part of a company’s overall strategic business objectives.

This maturing understanding creates an interesting time for boards as they endeavor to provide oversight and support to their management teams, who hold responsibility for integrating DE&I into business models.

In a recent discussion among professionals from Grant Thornton and the North Texas Chapter of the National Association of Corporate Directors, focus was on key matters driving attention to DE&I at the board level and key challenges boards face in meeting their DE&I goals. The program was moderated by Nicole Blythe, Grant Thornton Audit Services partner.

Factors driving DE&I focus

Attracting and retaining employees. People are choosing where, how and for whom they want to work. In recent Grant Thornton research (see “The state of work in America”), 21% of respondents said they turned down a job because the company’s values did not align to their personal beliefs. “You have a unique convergence where something that is admirable from a policy standpoint actually has real bottom-line impact for the business,” said Bobby Majumder, Partner Attorney at Frost Brown Todd, and member of the board of Bluerock Residential Growth REIT, Inc. He is also a member of the board of trustees of the Total Income + Real Estate Fund and the advisory boards of the Atlantic Council’s South Asia Center and of the Cattle Baron’s Ball.

Expanding the addressable market. Companies with diverse workforces benefit from a broader set of experiences and diversity of thought, which translates into more inclusive products and services that can increase the addressable market. Majumder explained: “When you have employees who are representative of different walks of life and are enthused about working with you, they are ambassadors for the company, which is good for sales.”

Addressing stakeholder interest. Companies are feeling the pressure to be more transparent about their efforts and results. Current and potential customers and employees, investors, and suppliers want to know how companies are addressing diversity. As stakeholders, they are making decisions based on DE&I performance. Institutional investors are more vocal about diversity at the board level and throughout the organization.