Most companies like to show their commitment to gay people. Due to advances in rights and legal recognition over the past few decades, it is now common to display a rainbow logo in June, during LGBTQI+ Pride Month. Large companies such as North Face, Anheuser-Busch InBev, Target and Kohl’s have recently launched inclusive advertising campaigns highlighting lesbian, gay, bisexual, transgender, queer and intersex (LGBTQI+) people.
From a business perspective, this is a strategy that is paying off, with “pink money” weighing 3.5 trillion euros worldwide, including 874 billion euros in the European Union. However, many members of the LGBTQI+ community describe these actions as “pinkwashing” if they are not supported by more substantial measures.
The absence of these measures is particularly apparent when we look at company boards of directors. Indeed, my research on role of business in the political sphereparticularly on the social questions such as the rights of LGBTQI+ peopleshow that the highest authorities still poorly reflect diversity today.
According to OutLEADERSHIP estimates, less than 1% of the 5,670 seats on the boards of directors of the 500 largest American companies by turnover are thus occupied by directors who are members of the LGBTQI+ community. In Europe, we have no data on this subject, which may seem all the more surprising given that the European Commission committed in 2020 to increasing opportunities for the community.
Costly homophobic policies
However, the arguments in favor of diversity within boards of directors appear very convincing. According to one of the greatest accounting bodies in the world, it translates into “more effective decision-making, better use of the talent pool [et] a consolidation of the company’s reputation and relations with investors.
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Based on data from 657 U.S. publicly traded companies between 2003 and 2016, Finnish researchers from Aalto University and the University of Vaasa also observed that companies that adopted policies supporting the LGBTQI+ community were both more profitable and better valued on the stock market. For example, by improving one’s grade in the Corporate Equality Index of the Human Rights Campaign Foundation, a company can see its stock market value increase by 7%.
Conversely, homophobic and transphobic policies cost money. Open for Business published a report estimating that Hungary, Poland and Romania were losing almost 7 billion euros per year due to their discriminatory policies against LGBTQI+ people. However, by increasing the rights of members of this community by 10%, these countries could record an increase of 3,400 euros in their GDP per capita.
Furthermore, a truly diverse board of directors would allow companies to improve their assessment in terms of environmental, social and governance (ESG) criteria as well as those, promoted in Canada, relating to equity, diversity and inclusion (EDI). By occupying positions of power, members of the LGBTQI+ community help strengthen their company’s mission for the benefit of the global community. In particular, they can defend the rights of sexual minorities in the approximately 70 countries where homosexual relations still constitute a crime.
How to progress?
We must now ask ourselves the right question: how can companies induce change? For a long time, the recruitment of board members has been seen as an exercise reserved for insiders, where current directors invite their friends to sit alongside them. When this is not the case, many boards of directors are looking for people who hold or have held the position of CEO or CFO.
However, this situation does not make things any easier, because not only LGBTQI+ people, but also women, are already fighting to break the glass ceiling in order to obtain management positions. To diversify the pool of qualified candidates, nomination committees must therefore broaden their criteria beyond people with experience as a business manager within listed companies.
Created in 2022, theAssociation of LGBTQ+ Corporate Directors says the secretive and non-transparent process of recruiting board members is a barrier to inclusion. Above all, it draws attention to the number of LGBTQI+ people ready to sit on boards of directors.
On this point, the program OutQUORUM BoardFit, an OutLEADERSHIP initiative, was launched in 2016 to prepare LGBTQI+ leaders to take their place on boards of directors. As part of this program, a database of people ready to serve on the board of directors was created. The organization therefore encourages LGBTQI+ business directors to declare themselves, make themselves known and mentor qualified candidates to sit on the board of directors.
If volunteer-based systems such as those listed above fail, it may soon be time for the European Commission to rely on its 2020-2025 strategy for LGBTQ equality I+ to make the representation of sexual minorities on boards of directors compulsory. However, it is still preferable that companies do not wait until they are obliged to act before doing so.
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