Cracking the corporate code
Serving on a corporate board is a good gig – and Indigenous people are missing
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, she developed a “board bio” which she says is different from a resume because it highlights attributes that boards are looking for (such as experience with regulatory agencies.) She also hired coaches in order to sharpen her pitch.
“I really wanted to try to get on a board and I didn’t want to look back and say, ‘Oh, I wish I had done X, Y or Z. ‘ If I had done that, I would’ve made it so.”
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 these companies have 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 one percent.
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, on top of that she is awarded both options and stocks that depend on the success of the company 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 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 crisis. 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. And the number of Indigenous people who hold board seats is too small to register; far less than one-tenth of 1 percent.
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.
There are also a number of Indigenous people serving on regional bank boards, utility companies, across the energy sector.
Across the board the data shows movement. The 2021 U.S. Spencer Stuart Board Index shows that white directors fell slightly in 2021, yet still account for eight of every 10 board members, and six of the 10 are white men. (Spencer Stuart is a firm that conducts corporate searches.)
The index also found that directors from historically underrepresented groups accounted for 72 percent of all new directors at S&P 500 companies, up from 59 percent in 2020. Female representation increased to 30 percent 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 percent of the U.S. population identifies as African American, Hispanic, Asian, American Indian/Native Alaskan or multiracial, those groups make up only 21 percent 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 that public companies are making slow progress appointing more diverse boards. The goal of the Alliance is to have women and minorities make up 40 percent of all corporate board seats, up from 17.5 percent in 2021.
And the thing is, the Alliance for Board Diversity says based on the skill set of new board members, “women and minority board members currently 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 board members 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 one percent 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 one percent 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 of 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 who did not comply. Then in May of 2022 a Los Angeles court struck down the law as unconstitutional and 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 percent 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 California 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.
“It definitely is right to make sure that Native American people are included in the overall discussion,” Ramos said. “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 she said 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, and 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. And that’s been a practice that’s been in place before I even got here. We’ve had Indigenous people on and off the board, Winona LaDuke, Rick Williams, others, throughout our history.”
Part of that means reshaping the debate about leadership.
“Many corporations now are adopting leadership structures that may be called something very fancy, but might have really strong roots in indigenous leadership,” she said. It’s the idea that there is a way to think about organizations and values that have not been previously considered.
“You kind of have to peel back the onion really, and try to understand, it’s not just who’s on the board, but who’s really engaged? And in what way, and what committee are they in charge of?” She said that’s all a part of the board governance piece and what will take for people to successfully lead and transform organizations.
ICT has been building a list of Indigenous representations on corporate boards, government-sponsored enterprises, university boards, and major nonprofits. The idea here is that there is a 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. That same 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.
“When they have a woman or minority as their nominating or governance chair, boards are not immediately more likely to have higher percentages of women or minorities,” the report said. “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 for people being on boards. Because I think people in the Native community have a lot to contribute to corporate boards.”