Company boards are being held to higher levels of accountability and transparency

In addition to focusing on the financial and operational health of an organization, more company boards are getting deeply involved in areas like diversity and sustainability, current and former board members explained on Monday during a panel at Fortune’s Most Powerful Women Summit. 

“The important words that have come out of the pandemic in the last year around boards are accountability and transparency,” said Bonnie Gwin, vice chairman and co–managing partner at Heidrick & Struggles. “The general role in the board has not changed, but I think the emphasis points for directors have changed, and the need to get into some of the details—that’s changed.” 

Over the past 20 months, boards and their members have had to come to terms with what they didn’t know when it came to various situations, including racial justice, as well as issues around environmental, social, and corporate governance, said Glenda McNeal, president of enterprise strategic partnerships at American Express.

For instance, many boards struggled to find the right message and reactions to the George Floyd murder. “Many of the people sitting in that group have no knowledge and no experience about any of this. So how are they going to guide and provide the appropriate advice on what management should do?” McNeal said. But that doesn’t mean they can be complacent, McNeal noted. Boards now have increased accountability and responsibility around issues that many had never discussed before, such as social justice. So board members have to transition to being open to learning, to understanding, and being vulnerable enough to know what they don’t know.

“Now we have this phenomenon where boards are going to be held accountable for not just knowing that there’s something to pay attention to, but that they are actually asserting a point of view—which in many cases they have not historically had to do,” said Edith Cooper, cofounder of Medley. Cooper sits on the boards of Amazon and PepsiCo.

Stakeholders, including employees, consumers, and investors, are much more active in making sure that a company is taking actions that speak to its responsibilities to both shareholders and to people in the communities where these companies operate. “That’s been a huge step change that is quite positive,” Cooper added. 

That, in turn, has caused many companies and boards to become more self-reflective, Gwin said. They’ve started to ask themselves: Do we really have the right folks around the table? 

Diversity, in particular, has become a major flash point for boards. Nasdaq, for instance, will require corporations listed on the exchange to have at least one or two diverse board members—or be forced to explain, in writing, why they can’t comply.

When it comes to board members, the breakdown is still mostly white at 59%, with 28% of members identifying as Black, 9% as Asian, and 4% as Hispanic, according to the latest data from Heidrick & Struggles. About 58% of members are male, while 41% are female.

Diversity is good for business—and companies have, perhaps more than ever before, discovered it’s critical when trying to advise on issues of the day. “When you have diversity in the boardroom, there’s no way to escape the conversation,” McNeal said, particularly around tough issues like racial and gender equity. 

Building that up, however, is “not a casual thing,” Cooper added. If, for example, a company currently has 10% market share, but they want to expand to 25%—you don’t sit back and say, ‘Let’s do the best we can, but we’ll get there,’” Cooper said. Instead, you come up with the criteria that you’re going to use, and the levers that you could pull. That same level of intention is required when building diversity, she said, and companies can’t simply go through the motions.

“Checking the box,” Gwin said, “is a very dangerous place for a company to be.”