By Allison Levitsky – Tech Industry Reporter, Silicon Valley Business Journal
Raul Vazquez is an anomaly in Silicon Valley — the CEO of Oportun has served on the boards of not one, but two Fortune 500 companies.
That sets him apart in a region with 45 Fortune 1000 companies run by hundreds of board members, but only 13 who are Latinx.
“There’s more work to do,” said Vazquez, who has been on Intuit Inc.’s board since 2016 after serving on Staples Inc.’s board for three years. “Diverse boards lead to better results, and that’s because I think a diverse board and a diverse management team is better able to serve a broad, diverse customer base.”
Data is clear that those of Hispanic descent are underrepresented on corporate boards. In California, Latinos and Latinas make up 39% of the state’s population, but just 13% of the state’s public companies had a Latinx board director as of July 1, according to the Latino Corporate Directors Association. The divide becomes starker when considering how other groups are represented: Asians make up 15% of California’s population but serve on 42% of the 662 public company boards in the state, while Blacks, who comprise 6%, are on 16% of company boards.
Granted, change is on the way as California’s Assembly Bill 979 bans all-white public company boards this year. (More than one-third of California’s public companies had all-white boards in 2020.) Already, U.S. companies added 82 Latinx board directors between January and March — a 331% increase in appointments from the first quarter of 2020.
But advocates say there’s still a long way to go, both nationally and in Silicon Valley.
“Most of these corporate CEOs do not have experience with our community, or even with this region — they may not have been born and raised in California, or even the Southwest,” said Ron Gonzales, the president of the Hispanic Foundation of Silicon Valley who also served as San Jose’s only Latino mayor. “When they think race issues, they think ‘Black and white.’ But if you’re raised in California, when you think race issues, you think about Latinos.”
And when it comes to boardrooms of Fortune 1000 companies, a new report from KPMG and the Latino Corporate Directors Association finds Latinx people have made “no progress in the last decade by any measure” since they hold only 3% of seats nationally.
“It’s important for us Hispanics and Latinos that we’re not just talking about it, but we’re showing what the reality truly is,” said Jose Rodriguez, a retired audit partner at KPMG who led the firm’s sponsorship of LCDA.
The business and political landscapes are forcing a change to the boardroom dynamic. AB 979 requires that by the end of this year, public companies based in California must have at least one director who is an underrepresented minority — either a person of color or an LGBT individual — and before the end of 2022, they must have two or three, depending on the size of the board. Nationally, Nasdaq has proposed new rules that would require listed companies to “have, or explain why they do not have” at least one or two directors who aren’t straight, cisgender, white men, depending on the size of the board.
Backlash and skepticism
Not everyone supports these efforts to diversify boards. Conservative activist group Judicial Watch sued California’s secretary of state over AB 979 in September. In a statement issued at the time, Judicial Watch President Tom Fitton called the law “brazenly unconstitutional” and said such quotas are “slaps in the face to the core American value of equal protection under the law.” The Pacific Legal Foundation also opposes AB 979, stating in an email that it “gets the concept of equality all wrong.”
Keith Bishop, a corporate and securities law attorney in Orange County who served as California’s commissioner of corporations in the 1990s, said AB 979 violates the federal Equal Protection Clause and the state constitution, which bars any class of citizens from receiving “privileges or immunities” that aren’t afforded to all citizens.
Bishop also worries that because the law relies on self-identification, boardmembers could lie about their ethnic background. And he takes issue with the notion of allowing race to be a factor in hiring, pointing out that the NBA has a large percentage of African American players.
“Businesses are there to make money for their shareholders. They should want the best possible boards of directors — the ones that contribute the most to the success of the company, just like the NBA wants the best basketball players they can get,” Bishop said.
Advocates are quick to point to research that shows better financial results at companies with diverse leaders. McKinsey & Co. found in 2019 that companies whose executive teams ranked in the top quartile for ethnic diversity were 36% more likely to have above-average profitability than their counterparts in the bottom quartile. But Harvard Law School professor Jesse Fried questions the value of such correlations, stating in a working paper that “other factors, such as firm size or industry, could explain both higher returns and a more diverse board.”
Opening the pipeline
Such skepticism is not the dominant narrative in Silicon Valley, where the current social climate has big companies — at least publicly — pledging support for diversity and inclusion efforts. But these commitments haven’t yet yielded much change in the boardroom. Nationally, technology lags 14 other industries when it comes to Latinx representation. Only 15% of U.S. tech companies on the Fortune 1000 have a Hispanic or Latinx board member — compared to 42% of food, beverage and tobacco companies and 37% of transportation firms. According to LCDA research, Apple Inc., Tesla Inc. and Broadcom Inc. each have one, and HP Inc. has two.
Meanwhile, some of the biggest names in Big Tech have no Latinx representation. Among them: Alphabet Inc., Intel Corp., Facebook Inc. and Cisco Systems Inc.
“There are some (companies) doing better than they were 10 years ago regarding employment, but they’re all basically D-minus when it comes to board representation,” said Gonzales. “The other reality is, I think, most of these boards would rather move to Delaware than stay here in California and deal with this issue.”
The Hispanic Foundation trains Latinx leaders to serve as nonprofit directors through its Latino Board Leadership Academy, and Gonzales said the foundation is in talks with several organizations about offering a similar program for corporate boards. Such a program would provide one more pipeline of talent for companies to tap — but Gonzales and other advocates say there are plenty of worthy candidates that companies can find now. But they don’t necessarily run in the same social circles as company leaders, and may be ruled out because they don’t already have experience serving on a public company board.
“If you make that a hard requirement, then it’s going to be much harder to find a Latino. It’s going to be much harder to find a woman, because we haven’t had the same kinds of opportunities,” said Vazquez, the CEO of Oportun since 2012 and a former Walmart executive who was an SVBJ Latinx Business Leadership honoree last year. “If someone has conviction and they say, ‘Yes, we need a Latino and Latina, and we think that they are going to be able to help,’ then hopefully some of those requirements become soft as opposed to hard,” he said.
What happens at the top?
The Latino Corporate Directors Association is one group that offers help to companies looking to diversify their director candidate pools.
“We don’t just hand them our member list,” said Kathy Jurado Munoz, LCDA’s vice president for advocacy and demand. “What we do is we specifically look for those skillsets and attributes that they’re looking for — and we don’t even limit ourselves to our own membership.”
For example, a top 50 bank that recently approached Rodriguez about an open board seat walked away with a list of more than 30 local candidates with relevant skills. The bank selected a director from LCDA’s list last month.
Companies that lack diversity in their workforce and on their executive teams may find that a diverse boardroom has a trickle-down effect on the rest of the company.
Vazquez said he’s seen that play out firsthand. Over the years, he has witnessed situations where minority business leaders “got an opportunity that they might not have otherwise had … that they absolutely deserved and have done an exceptional job with,” thanks to a diverse board’s talent decisions.
“We all need to fight the tendency of being most comfortable with those who are most like us,” Vazquez said. “To the extent that you’ve got a board that is not diverse, and that maybe skews all toward males, all things being equal, they may favor a candidate that is most like them.”
But naming just one minority director to a corporate board isn’t enough, he said: “I’ve had the good fortune to be in rooms where I felt very comfortable expressing an opinion that may have been a different one,” Vazquez said. “You want to have enough diversity so that no one ever feels like they’re on an island."