Can C-suites and boards of directors diversify beyond 30%, even if they want to?
Several decades ago, Economics Nobel Laureate Thomas Schelling created a model to show how rapidly neighborhoods became segregated, even when the people already living there were open-minded about their neighbors. Could his model explain why boards of directors and C-suites trying to move the other direction reach a glass floor?
Schelling proved mathematically in his Spatial Proximity Model how rapidly neighborhoods become segregated based on race or income. His results showed if you had a fairly open, tolerant personal preference wanting just one out three people to be like you, the neighborhood would rapidly become 72% segregated. And if you wanted just slightly over half, 52% of the people to be like you, the neighborhood quickly became 94% segregated. He used it to explain the dramatic neighborhood changes in the 1960’s and 1970’s.
These relatively tolerant neighbors demonstrated something Schelling discussed in his book Micromotives and Macrobehavior (1978). The overall results did not match the individual desires.
So what would happen if we started at the opposite point, a neighborhood already segregated and residents who wanted to see it become a diverse community? Think of the C-suites and boards of directors of United States based corporations a few years back as totally segregated neighborhoods, the executive roles and seats around the boardroom table as houses.
Let's say we have a board or C-suite with members that want change; diversity to make better decisions and to reflect more closely the country and today’s marketplace. Assume our enlightened leaders will feel comfortable with just one out of three others being like them. Will those enlightened boards and C-suites ever get close to that level? Schelling’s model suggests diversity will stop around 28%, well short of the 67% acceptable level.
I looked at several surveys about diversity in Fortune 500 company boards. The most "enlightened" boards have gender, racial and ethnic diversity in the 25-30% range. While there may be others, I only found one company with a truly diversified board of directors, Ingredion, 70% being women, African Americans or Latinos. Reaching that achievement took the committed leadership effort of their immediate past CEO Sam Scott and his successor Ilene Gordon. That commitment also carried over to their C-suite.
The segregation levels in Schelling’s model represent equilibrium points. Whether moving from the bottom up or the top down, you reach the equilibrium point and change stops. So how can you achieve real diversity; reaping the benefit of multiple perspectives to make optimal decisions when facing complex issues?
To replicate Ingredion's achievement, a company can set a maximum quota instead of the typical minimum one, namely their C-suite or board will not have more than 50% of any group, whether it be white males, African Americans, Asian Americans, Latinos, women or people with disabilities.
As more C-suites and boards achieve significant diversity levels greater than 30%, we will better understand the strategies that can make it happen. Otherwise it just doesn't seem possible to break through Schelling's mathematical glass floor.