Indigenous representation lacking on US corporate boards

PHOENIX

Mary Smith had a plan: She was going to serve as a member of a corporate board. She already had the resume. Smith is an attorney, and she had worked as the chief executive officer for the U.S. Indian Health Service, a $6 billion-a-year operation.

“I think for most people, you’re not going to get a call out of the blue,” she said. “You have to put yourself out there so that people know that you want to be on a corporate board because there are recruiters that recruit for corporate boards. But, the vast majority of board seats are still filled through networking.”

Smith’s planning was deliberate. She “very intentionally treated it like a full-time job.” That included learning about corporate governance and board responsibilities and developing a “board bio” to highlight attributes boards are looking for, such as experience with regulatory agencies. She also hired coaches to sharpen her pitch.

“I didn’t want to look back and say, ‘Oh, I wish I had done X, Y or Z.’”

Smith has made a place for herself at a table where few Indigenous people have historically been invited.

There are some 4,000 companies traded on Wall Street through the New York Stock Exchange or NASDAQ. Each of them has professional board members who are responsible for corporate governance. The number of American Indians and Alaska Natives represented on those boards is far less than one-tenth of 1%.

Smith, a citizen of the Cherokee Nation, now serves on the board for PTC Therapeutics Inc., a publicly traded global biopharmaceutical company that focuses on the “discovery, development and commercialization of clinically differentiated medicines that provide benefits to patients with rare disorders.”

She is paid a board fee of $30,659, according to the company’s report with the Securities and Exchange Commission. She also is awarded both options and stocks that depend on the company’s success and could be worth hundreds of thousands of dollars.

Smith says there is more to serving on a board than showing up to four meetings a year.

“That sounds like an easy gig, but, no, it’s actually a lot of work,” she said. There are documents that must be reviewed, a duty of care and loyalty. One poor decision could result in liability.

“So, yes, you have to be very thoughtful and exercise your fiduciary duties to the corporation.”

According to the corporate search firm Spencer Stuart and its annual report index, the total average compensation for a board seat is $312,279. This average reflects actual director compensation, including the voluntary, and usually temporary, pay cuts some boards took during the height of the pandemic. More than three-quarters of boards provide stock grants to directors in addition to a fee.

Serving on a corporate board is a good gig, yet there are a few prominent Indigenous board members. Cherie Brandt serves on the board of TD Bank in Toronto. She is both Mohawk from Mohawks of the Bay of Quinte and Ojibway from Wiikwemkoong Unceded Indian Reserve. She was appointed last August. Kathy Hannan, Ho Chunk, serves on Otis Elevator and Annaly Capital Management.

A number of Indigenous people also serve on regional bank boards, utility companies, across the energy sector.

Overall the data reveals movement related to diversity. The 2021 U.S. Spencer Stuart Board Index shows white directors fell slightly in 2021 yet still account for eight of every 10 board members, and six of the 10 are white men.

The index also found directors from historically underrepresented groups accounted for 72% of all new directors at S&P 500 companies, up from 59% in 2020. Female representation increased to 30% of all S&P 500 directors.

“Despite the record number of new directors from historically underrepresented groups, the overall representation of some demographic groups on S&P 500 boards falls short of their representation in the U.S. population,” Spencer Stuart reported. “For example, although 42% of the U.S. population identifies as African American, Hispanic, Asian, American Indian/Native Alaskan or multiracial, those groups make up only 21% of S&P 500 directors.”

The 6th edition of the Missing Pieces Report: The Board Diversity Census by the accounting firm Deloitte and the Alliance for Board Diversity is a multiyear study that found public companies are making slow progress appointing more diverse boards. The goal of the Alliance is to have women and minorities make up 40% of all corporate board seats, up from 17.5% in 2021.

And the thing is, the Alliance for Board Diversity says based on the skillset of new board members, women and people of color are more likely than white men to bring experience with “corporate sustainability and socially responsible investing, government, sales and marketing, and technology in the workplace to their boards.”

In other words: If the new framework is sustainability, especially Environment, Social, Governance, or ESG, then people of color who are appointed to boards are more likely to be prepared for the task ahead.

Native Americans are largely absent from corporate leadership.

The numbers are striking. According to Deloitte, less than one-tenth of 1% of all corporate board members are in the “other” category. There are so few Indigenous people in corporate boardrooms that there is not even a measurement. (The Spencer Stuart Board Index simply reports less than 1% for American Indian and Alaska Native representation.)

There are a couple of initiatives trying to change that. The first comes from the National Association of Securities Dealers Automated Quotations, or NASDAQ, a computerized system for trading stock. In August 2021 a Board Diversity Rule was established that requires companies to use a standard template for board representation and “have or explain why they do not have at least two diverse directors.”

And in California, a 2020 law requires companies headquartered in that state to have one to three board members who self-identify as a member of an “underrepresented community,” which includes Asian, Black, Latino, Native American and Pacific Islander individuals, as well as those who are gay, lesbian, bisexual or transgender. The law allowed the secretary of state to fine companies that did not comply. Then in May 2022 a Los Angeles court struck down the law as unconstitutional; its application is on hold until the appeal process is complete.

But companies are acting anyway. Four years ago nearly one-third of public company boards in California were composed of all men. According to the most recent report from the California Partners Project, today fewer than 2% are. This year two-thirds of California public companies have three or more women directors — six times as many as in 2018.

“I think it’s very important to have representation, especially from the Native American community,” said Assemblyman James Ramos, D-San Bernardino. Ramos is a citizen of the Serrano/Cahuilla tribe, and is the first California Indian to be elected to the state Assembly. “It serves two different folds, one to make sure that representation of not only California’s first people, but that the nation’s first people has a voice in driving the economics of our community, of our state, and of our nation.”

Ramos said it’s also aspirational, demonstrating opportunity.

“When you’re putting statistics and data together, we hear it all the time: Latino population, right? Statistics and data. African American, statistics and data. And yet we’re talking about people of color and diversity and not even mention Native American people or even California Indian people in general.”

There have been a significant number of Native Americans serving on philanthropic boards.

Sherry Salway Black, Oglala Lakota, has served on a number of such boards and says she heard the narrative often that only one or two Native Americans served on private foundation boards. So she did a “quick and dirty” survey and found at least 28 Native people serving on 13 private foundations, and nine Native people on the boards of seven community foundations.

One area where there is a lot of Native board action is for Community Development Financial Institutions that are mission driven and focused on community building and access to capital. There are dozens of such lending institutions, and it’s been especially important in the agriculture sector.

Carla Fredericks, Mandan, Hidatsa and Arikara, is chief executive officer of The Christensen Fund, a $300 million foundation. She said it’s important to be intentional about how board members are appointed.

“This is long overdue,” she said. “Even as we’ve tried to get additional board members for our board, we are certainly aware that while there’s incredible leadership experience in Indian Country, there’s not a lot of board experience that people have. So it’s really important to build that.”

Fredericks said it can be a self-perpetuating problem if boards require previous experience but don’t explore translatable experiences.

“We took a broader lens to looking at candidates,” Fredericks said. “I also think that we had a really intentional lens to recruit Indigenous people to the board.”

ICT has been building a list of Indigenous representation on corporate boards, government-sponsored enterprises, university boards and major nonprofits, illustrating the deep talent pool already available. When members of Congress, for example, retire or even lose an election, they are often sought after as corporate board members. The process is not the same for tribal leaders who have been managing multimillion-dollar enterprises, especially large tribes such as the Navajo Nation or the Cherokee Nation.

One part of that equation is how boards recruit new members. The report Missing Pieces, a 2021 census compiled by the Massachusetts Institute of Technology Sloan School of Management, said there is an immediate impact after placing women and minorities into key positions, such as on the nominating committee. “After two years, these boards are more likely to have higher percentages of women or minorities.”

Mary Smith, the Cherokee Nation citizen on the PTC Therapeutics board, said there is a need to expand the network beyond former chief executives into other areas of experience, such as tribal leadership.

“I would love to see more Native Americans on boards. And I hope that some people would start to say, ‘Yeah, I could do that.’ And then try to put themselves out there to be on the radar,” she said. “People in the Native community have a lot to contribute to corporate boards.”