Arkansas' Public Firms Lack Director Diversity

by Mark Hengel  on Monday, Jul. 28, 2008 12:00 am  

Mary Good, dean of the Donaghey College of Information Science & Systems Engineering at UALR, serves on Acxiom Corp.'s board of directors.

(To see the lists of minorities and woman who serve on Arkansas public boards as well as a pie chart depiction of the numbers, click here. To see the list of Arkansas public companies lacking women or minorities on their boards, click here.)

Arkansas' 20 public companies have a total of 188 members on their boards of directors currently. Of those seats, only 16 are held by women and 13 by minorities, an analysis by Arkansas Business shows.

Women make up 51 percent of Arkansas' population, according to 2006 U.S. Census estimates, yet they comprise only 8.5 percent of the board members of the state's public companies.

And while blacks, Hispanics and Asians make up 21 percent of the state's population, Census estimates show, they account for only 6.9 percent of board members.

In Arkansas, men account for 91.4 percent of seats on boards of directors of public companies, and white men account for 85.1 percent.

Women and minorities are gaining more seats on public company boards across the nation, however, with boards of the nation's top companies making the greatest strides.

When told that the percentage of women and minorities serving on the boards of public companies in Arkansas did not match the state's demographics, Mary Good, who serves on Acxiom Corp.'s board, said, "I'm not too surprised."

Good is dean of the Donaghey College of Information Science & Systems Engineering at the University of Arkansas at Little Rock and serves on two boards, one public and one private. She serves on Acxiom's board as well as Delta Trust & Bank's board. On both boards, she is one of two women, she said. Good, however, said the situation has greatly improved since she began serving on boards in the 1970s.

"I have served on several boards in my career, and we are in much better shape today than we were 15 years ago," she said. "Many of the early boards I was on, I was the only woman."

Compensation for service on the board of a public company varies widely, but it can be lucrative. For example, non-employee members of Acxiom Corp.'s board received between $50,000 and $325,000 for fiscal 2008, according to the company's proxy on file with the Securities & Exchange Commission. Non-employee members of the Bank of the Ozarks board, however, received between $10,250 and $26,250 for 2007, according to SEC documents.

Seeking "Expertise"

 

Of Arkansas' public companies, nine have no women or minorities on their boards of directors.

Although Simmons First National Corp. of Pine Bluff has no women or minorities on the board, J. Thomas May, Simmons CEO and chairman, said the boards of its eight community bank charters reflect more diversity. Most of the community boards have either a minority or woman represented, though the majority of community board members are white males.

May said Simmons looks for members of diverse backgrounds. However, the corporate board is also seeking a diverse set of leadership skills to fill seats on its board.

When Simmons chose the members of its current board, "we were looking for certain people in certain categories," May said. "That's why these people were selected. The bulk of our members are the presidents of particular companies. We are looking for particular expertise."

The company's board has members such as the president of Farm Bureau Mutual Insurance of Arkansas, the Arkansas president of AT&T Corp. and the CEO of CDI Contractors LLC. The three individuals provide experience running a diverse group of companies, May said, and also represent segments that are important to Simmons' business.

May said diversity is important to the company, and Al Lowery Jr., Simmons vice president and an African-American, sits on the central Arkansas board of Just Communities, an organization dedicated to encouraging better relations among all races, religions and cultures.

Andrew Melton, CFO and senior vice president of ThermoEnergy Corp. of Little Rock, said his company's board also has trouble finding women and minorities capable of serving on its board.

The company, which develops technologies for wastewater treatment, has to strike a balance between investors and individuals with knowledge of the company's industry, Melton said. Board members include the chemistry department head at Sam Houston State University in Huntsville, Texas, and the director of finance at FlightSafety International, an aviation and marine training company headquartered in Flushing, N.Y. Melton said the board sought the chemistry professor because of his knowledge of the industry. The director of finance was selected for his knowledge of accounting practices.

"If you can send us any female or minority that wants to serve on a public board and who has knowledge in [our industry], we would consider adding them," Melton said. "The broader experience base we have for the board, the more beneficial it is to us."

"Some Options"

 

Lawrence Davis, chancellor of the University of Arkansas at Pine Bluff and an African-American, said if a company is searching for candidates for a directorship, he could "give them some options."

Many of the university's faculty members serve on boards throughout the country, and Davis himself serves on the Southeast Regional Education Board and formerly served on the board of directors of the Little Rock branch of the St. Louis Regional Federal Reserve. He does not serve on the board of a public company, though, he said.

He said he does not keep up with the issue much because there are many others of greater importance. However, he said a company should not limit itself to searching for the heads of other public companies of similar size.

"If that's the criteria they are using, there is not going to be much change anyway," Davis said.

Davis also said that companies should not be too timid to search beyond the business world to find candidates for positions on boards of directors. The University of Arkansas system board of trustees does not have a single member who is the head of a similarly sized educational institution, Davis said. Davis said the diverse mix of backgrounds on the system's board only aids the institution.

Women and minorities are underrepresented on boards across the country, said Diana Bilimoria, a professor of organizational behavior at Case Western Reserve University in Cleveland and co-author of several articles on the representation of women on corporate boards.

Bilimoria said the traditional method for selecting board members has been for a company's CEO or chairman to select someone from his personal Rolodex.

"The nomination proceeds on the recommendation of the CEO, and they [the CEOs] usually tap people they know or people who they know know," Bilimoria said. "It's an art of tapping into the network of powerful individuals."

Both Bilimoria and Damon Williams, a spokesperson for the Executive Leadership Council, an organization representing African-Americans in corporate America, said the "pipeline argument" is the most common explanation provided by companies for why women and minorities are not represented.

The argument is that since so few women and minorities possess the background required to become a director, many companies cannot find qualified women and minorities to fill open board seats.

Williams said that his organization is evidence that the pipeline argument is not valid.

"With the Executive Leadership Council alone, you are talking about more than 400 of the most senior African-Americans in corporate America," Williams said. "The fact is that this argument that there aren't enough African-Americans to fill the positions is not applicable."

Williams said his organization will act as a conduit for businesses looking to broaden the representation on boards. The council has a program through the National Association of Corporate Directors that has certified more than 275 of the council's members to become directors.

"It's not a question anymore of are there people out there," Williams said. "It's a question of where corporations can reach out to and find qualified candidates."

Bishop Steven M. Arnold, senior pastor of St. Mark Baptist Church in Little Rock, said he was asked to serve on the Bank of the Ozarks board of directors after his church transferred accounts to the bank.

Arnold also serves on several volunteer boards, including the University of Arkansas for Medical Sciences Winthrop P. Rockefeller Cancer Institute Foundation Fund board. He said there are considerable differences between boards such as the institute's and the Bank of the Ozarks board, because the public company is profit driven.

Asked whether he could recommend any women or minorities to serve on a private board, he said, "We've got a membership of 6,500 people. There are easily between five and 10 people that I could recommend."

The Argument for Diversity

 

Williams said many of the nation's largest public companies have diversified their boards in response to criticism.

Williams pointed to a study conducted by the council in 2004. Of Fortune 100 companies, only 11 had no African-Americans.

Of Arkansas' 20 public companies, only two are ranked in the Fortune 100 - Wal-Mart Stores Inc. of Bentonville at No. 1 and Tyson Foods Inc. of Springdale at No. 88. Both companies have comparatively diverse boards of directors. Wal-Mart's 14-member board is composed of three women, two blacks and one Hispanic. Two women, one black and one Hispanic serve on Tyson's board.

While many of the largest private companies have diversified in response to criticism, Williams also said the fact that many of the nation's largest companies have the most diverse boards is evidence that diversity is good for business.

"We [the council] would say there does seem to be a correlation there showing that inclusion allows you to do more things," Williams said.

Williams expects the situation to improve, though. The council began about 20 years ago, with a membership of only 19. The pool of blacks from which a company could draw for board membership was small.

A study conducted by the council in 2005 - and which it is updating - shows that about 720 blacks now hold leadership positions within three levels of the CEO, Williams said. The number of blacks serving on corporate boards has also risen considerably since 1960, when none served on the boards of public companies. In 2004, more than 250 held directorships, according to a council study.

"That population initially was not there," Williams said. "But now that there is that segment, there is a greater depth of talent the companies can draw from."

Good said she expects the number of female and minority board members to increase in coming years as many of each group work their way up the corporate ladder.

"It will [increase] because the new young women who have come into the system over the past 15 to 20 years will make a difference. You have to give them time to mature," Good said.  

 

 

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