Visible Diversity: A conversation with Equilar's David Chun.

• Author: Shaw, David
• Position: ENDNOTE - Interview

This issue features our first Directors to Watch focused on ethnic diversity or, more specifically, directors of color (see page 40). For more than a decade, we've annually featured rising and accomplished women directors. My colleague Scott Chase has spearheaded our efforts to highlight women directors, and has now taken the lead on this new annual section in the magazine.

I think most everyone "gets" the idea of boardroom diversity, but I worry that diversity itself has become something of a governance check-the-box exercise. A woman director? Check. A director of color? Check. Institutional investors and governance watchdogs ought to be happy, right?

But checking the box ignores the larger issue of the board representing the interests, and makeup, of shareholders and stakeholders. Does your board look like your customers and your employees?

David Chun, chief executive officer and founder of Equilar, which provides and tracks an exceptional amount of data about board composition and senior executive compensation, has become my go-to guy on questions of board composition.

"Boards aren't diverse enough and there's certainly room for improvement," he says. According to Equilar's BoardEdge database, boards in the Fortune 500 are composed of 8% African-Americans. Asian-Americans and Hispanics/Latinos each fill 3% of board seats.

But U.S. Census data from July 2016 shows U.S. population ethnicity as follows: 13.3% African-Americans, 17.8% Hispanics/Latinos, and 5.7% Asian-Americans.

On the sheer face of it, Fortune 500 boards don't represent the distribution of ethnicity in the United States, not by a long shot. The greatest underrepresentation appears to be in the Hispanic/Latino category, where these directors are underrepresented by a factor of 6 compared to share of population.

Chun talks about a recent event held by Equilar, where Michelle Edkins, managing director & global head, investment stewardship for BlackRock, discussed "visible diversity." "That was the first time I'd heard the term," he says. "Is diversity about gender, nationality, age, orientation, race? Visible diversity says that having women and people of color on boards is not a social justice issue so much as a talent issue --it helps with recruiting. Are potential employees represented at the board and C-Suite level? So, in the talent wars, you want as broad a pool of possible board candidates."

That same concept of visible diversity plays out when looking at a company's...