FINANCE Bloomberg Businessweek February 10, 202027PHOTOS: COURTESY MARRIOTT. ILLUSTRATION BY KHYLIN WOODROW
○ If companies want more diverse directors,
they can tap rising stars insteadLooking Beyond
CEOs for Boards
Outside corporate board gigs are a classic perk of
being a chief executive officer. The side jobs offer
extra pay, as well as a way to network—perhaps for
the next big job. But all those top bosses filling up
directors’ seats has a predictable effect: Since CEOs
are overwhelmingly white and male, they tend to
reinforce the lack of diversity on corporate boards.
That makes a push by Marriott International Inc.
to get lower-level executives to join boards a big-
ger deal than it might seem. CEO Arne Sorenson
says his aim is to give the hotel company’s rising
stars valuable experience. Incidentally, though, of
the five who have found board positions, three are
women and one is a black man. The same trend is
showing up at other large U.S. companies: Among
the 10 companies with the most employees serving
on other boards, the executives with directorships
are overwhelmingly women or people of color,
according to data compiled by Bloomberg.
There’s a long way to go before boards become
genuinely diverse. Goldman Sachs Group Inc. made
news in January when it announced it would no lon-
ger underwrite initial public offerings for U.S. and
European companies without at least one director
who is a woman or a person from an underrepre-
sented group. Although women make up half the
workforce, they didn’t exceed a quarter of S&P 500
directors until just last year.
For the first time, a majority of new
directors last year were either women or
men of color. Boards are casting a wider
net, in part, as a response to pressure
from investors such as BlackRock Inc.
and State Street Global Advisors, which
cite better returns for more diverse com-
panies. For different reasons—such as
the drain on CEOs’ time and energy—big
investors have also been pushing compa-
nies to rein in their CEOs’ outside board
service. A decade ago, half the CEOs in the S&P
500 served on at least one outside board, and many
were on at least two. Last year, almost 60% weren’t
on even one outside board.
Sorensen was one of the first Marriott executives
to serve on an outside board. He’s now a director
at Microsoft Corp. He felt it made sense to encour-
age other executives to get similar experience: Board
service could expose them to industries they need
to stay in touch with, including technology. ChiefTHEBOTTOMLINE Bigcompaniesareencouragingmore
executives to take outside directorships, and many are women or
people of color.Financial Officer Kathleen Oberg joined the board
of software company Adobe Inc. in January 2019.
Others went to businesses closer to Marriott’s con-
sumer focus. Stephanie Linnartz, a group president
in charge of consumer strategy, has been a Home
Depot Inc. director since May 2018. “The human
touch is very similar between our two companies,”
she says. “I think I’ve been able to bring back some
best practices from Home Depot and vice versa.”
Most companies are willing to let key executives
serve on one board, but usually that’s the limit, says
Julie Daum, who leads the North American board
recruiting practice at executive search firm Spencer
Stuart. And companies want to avoid situations
that might carry a reputational risk. “They don’t
just say you can go out and serve on any board,”
she says. Because of those risks—and long hours—
some companies still won’t entertain the possibil-
ity of their executives moonlighting as directors,
says Lisa Blais, who leads U.S. board recruiting for
Egon Zehnder in Boston.
But outside board service is a tool companies
use both to groom future CEO candidates and to
retain executives for whom a promotion is not
yet available, says James Drury, whose executive
recruiting company specializes in helping compa-
nies find boards for their executives to serve on.
Such a role can be lucrative: The average
total compensation for an S&P 500 direc-
tor passed $300,000 this year for the first
time, according to Spencer Stuart. For
companies seeking to fill boards, going
down a rung or two from the CEO has its
own advantages. Such people may bring
more specific skills, such as in human
resources, says Blais.
While the effort at Marriott doesn’t
have a diversity goal, executives who
aren’t white men benefit more because
they are in demand, Sorensen says. Meanwhile,
the willingness of companies to let their non-CEO
executives join boards means that many directors
are joining a board for the first time. “If they don’t
give us a first shot at it, it’s never going to change,”
says Linnartz. “I’m definitely trying to pay it for-
ward to other women.” —Jeff Green○ Oberg○ Linnartz