Corporations have benefited from our diverse state; it’s time for publicly held corporations to reflect the people who make up our workforce.
By Dean Florez, Special to CalMatters
Dean Florez served in the Assembly and state Senate from 1998-2010 and is the CEO of Balance Public Relations, email@example.com.
Publicly held corporations have dragged their feet long enough when it comes to diversifying their boards.
It’s 2020, and despite Latinos being the largest ethnic group in the state, they, along with African Americans, Asians and Native Americans, remain woefully underrepresented in the boardroom. And it’s not for a lack of talent.
There are business savvy people of color throughout the state who run their own enterprises and who manage large teams and multimillion-dollar budgets. Many hold MBAs and other advanced degrees. While California has become more diverse, the boards of public companies still look like the country clubs of a bygone era, thus creating a legislative push in California to compel publicly held companies to diversify their boards.
California has an opportunity to set a new standard on issues of diversity and equity in enacting Assembly Bill 979. AB 979 would require that publicly held companies in California have at least one director from an underrepresented community by the close of 2021. This new bill builds on a recently enacted law, SB 826, that required women to serve on corporate boards.
I recently learned that the boards of Del Taco, Chipotle and Pollo Loco are nearly all white according to data from the Latino Corporate Directors Association. Chipotle recently named Mary Winston, an African American, to its board in July, which is a step in the right direction. But imagine building a large fast food business around Mexican food, and then not having a Latino serving in the corporate governing body.
Del Taco, Chipotle and Pollo Loco are companies that market and serve large customer bases that include Latinos, while serving fast food versions of Mexican staples. It’s inexcusable that these California-based fast food enterprises have boards that lack diversity in a state like ours.
Diverse board members provide insight into the communities that they come from. To go back to the Mexican food example, there are always new trends in Mexican cuisine, and Mexican food has had a profound impact in California and in the U.S. The boards of any fast food enterprise inspired from Mexican cuisine would benefit from having representation of the people who come from the communities where its staple product originates.
Diversity on boards is also good for corporate governance. A diverse board can better consider the issues and needs of all of the key stakeholders from the shareholders to employees to the customers and communities that the company serves. People from underrepresented groups often interact more frequently with members of their communities who aren’t in the boardrooms or the C-suite than people who have been embedded in the power structure for generations do. Therefore, diverse board members can raise issues that relate to the class and preferences of the broader community that a company serves, eliminating the current echo chamber which does not add value nor increase returns on investment.
California is viewed as a hub of commerce in the Pacific Rim. Our state is the fifth largest economy in the world. Leaders in our state conduct business with companies throughout the region and the world. Diversifying boards would signal to our international trading partners that California enterprises value diversity within their ranks, which would help enhance engagement in the global marketplace.
Let’s set the tone at the top of public companies in California by mandating diversity in boardrooms. We need AB 979 on the books to force companies to provide more opportunities for diverse professionals to serve on their boards.
Corporations have had the benefit of operating in our dynamic and forward-thinking state, benefitting from our talent and innovation. Now is the time for publicly held corporations to reflect the people who make up our diverse workforce.
Dean Florez has also written about ditching office culture for a healthier future by teleworking.