That is how the top executives at one Midwestern real estate company, a young but thriving business, explained to recruiter Susan Shultz their reluctance to even consider naming a woman or minority candidate to a vacant board seat last year. “Success can breed complacency,” says Shultz, president of SSA Executive Search International in Phoenix. Members of the real estate company’s board, she adds, “all look alike: men, in their 40s, very successful, with private jets. They don’t want anybody who isn’t just like them to join them.”

Women and minorities who want to join boards still face an uphill slog in their quest. For example, the Hispanic Association on Corporate Responsibility (HACR) points out that while 14 percent of the U.S. population is Hispanic and Hispanics make up 10.7 percent of the work force, they represent only 5 percent of officials and managers and less than 2 percent of corporate directors. “You see a tremendous bottleneck in terms of their presence in the positions of the greatest power and influence,” says Alfonso Martinez, HACR’s CEO.

Increasingly, however, companies that restrict their quest for new directors to the traditional networks and insist on filling board seats with white males are finding that this strategy impedes the process of building a successful board. Certainly a board composed solely of white males might lead to negative newspaper headlines if civil rights groups attend annual meetings to ask why there are no women or ethnic minorities represented. But more pragmatically, good directors are becoming harder to find, and these communities appear to be the best source of boardroom talent available to be exploited.

Diverse Doyens
Directors are trying to ensure that not only are their ranks made up of those with the time, energy and expertise to contribute to discussions, but also that boards are lean enough to maximize effective communication. This equates to an ever-growing number of companies trying to tap into the pool of capable minority candidates. In 2004, says Julie Daum, head of the North American board recruiting practice at Spencer Stuart, nearly one-quarter of the 480 or so board seats at companies in the Standard & Poor’s 500 that opened up were filled by women, up from approximately 18 percent the previous year. (Minority candidates are more difficult to track because ethnic origin cannot always be determined by name alone, and companies do not always disclose a person’s ethnic background when announcing a board appointment). “It used to be that companies only wanted to recruit people they knew or who were part of their world,” Daum explains. “Now, instead of just filling one seat and saying, ‘OK, that’s done,’ boards are continually looking for diverse candidates.”

Idealism and civil rights have given way to capitalist practicalities and shareholder responsibility. CEOs and boards can no longer simply welcome a token woman or African-American, then declare their leadership “diverse.” Recruiters, directors and CEOs agree that building boardroom diversity is becoming a natural outcome of looking for the best possible candidate to fill a particular slot. Some board recruiting committees are mandating that each search for a new director include—or even be restricted to—women and minority candidates. Like most executive recruiters, Daum maintains a separate list of thousands of names for these occasions.

When Larry Johnston joined Albertsons, the Boise, Idaho-based retailer, as chief executive in April 2001, he did not set out to be the only company in Fortune’s Global 200 list with more women than men on its board. Of Albertsons’ 11 directors, six are women and some of those six are African-American and Hispanic. But the 56-year-old Johnston insists that this demographic anomaly is simply what occurred when he sought out the best candidates with the expertise the company needed. “We went looking for a corporate governance expert, and we found Bonnie Hill, the former chair of the Times Mirror Foundation, and a real expert on these issues,” he says. When Albertsons went in search of a retail leader, it found Beth Pritchard, former president and CEO of Bath & Body Works and a director of book giant Borders.

Most recently, the board wanted to enhance its marketing expertise, and ended up with a list of both men and women. The board nominated—and shareholders elected—Kathi Seifert, former executive vice president of Kimberly-Clark.

Johnston admits that this was not simply serendipity at work. During the 28 years he spent as an executive at General Electric, in particular his years overseeing GE’s medical products business in Europe, he grew to value diversity of all kinds. In Europe, he recalls, “we had men and women from 30 or 40 different countries working for that group; there wasn’t anyone, customer or supplier, who we couldn’t talk to in any language. We connected better with customers and developed better products because we had diverse viewpoints.” Eighty-five percent of Albertsons’ customers are women, making the gender breakdown an issue for Johnston at all levels of the company, right up to the boardroom. “Women have insights into our customers that no man can match, frankly,” Johnston says. Women, he argues, know how women shop, from how they react to product displays to the route they take through a store.

Nouveau Networking
Minority groups argue there are solid business reasons for increasing representation of women and minority groups in the boardroom. HACR’s Martinez notes that, according to federal government data, Hispanics own 40 percent of all minority-run small businesses in the United States. “From a market perspective, any company that isn’t pursuing [the Hispanic] market in any way they can isn’t being responsible to its shareholders,” he argues. “And to pursue that market, you need someone who understands it right at the boardroom table.”

While an ever-growing number of companies are interested in raising the number of minority directors, finding the right candidate means embarking on a new kind of networking. Forget about asking friends from the golf club or fellow service club members for their suggestions; these individuals are not found in traditional venues. In the past, companies that wanted minority candidates turned to the world of academia or to community organizations, where talented women or minorities faced fewer roadblocks in their ascent. That is how Reatha Clark King came to the attention of H.B. Fuller, a St. Paul-based manufacturer of adhesives and chemicals. King, 66, an African-American who was raised in segregated Georgia, had to “follow the opportunity trail” and leave her Atlanta home to pursue her interest in science. By 1978, that trail had led her to the University of Chicago (where she earned a master’s degree and doctorate in chemistry), to Columbia University for its MBA program, then, via Washington, to Minneapolis, where she became president of Metropolitan State University. “The CEO of Fuller read about my appointment, noted my background, which showed I could work within and lead large organizations, and asked if I would be willing to meet with him to talk about joining their board,” King recalls. She became the first African-American woman to sit on Fuller’s board, and has gone on to sit on four other boards, including that of Exxon-Mobil.

Today, highly visible board candidates and directors like King—named 2004 Director of the Year by the National Association of Corporate Directors—are at risk of being “overboarded,” recruiters say, being asked to take on too many board assignments. “The low-hanging fruit—the visible and obvious candidates—have all been approached, and many sit on very prestigious boards already and aren’t likely to take on too many new assignments,” says Korn/Ferry’s Chuck King (no relation).

The recruiting world is evolving to respond to the growing complexity of finding directors of all kinds. To identify promising minority candidates, Spencer Stuart’s Daum studies magazine articles, and asks the companies she works with if they have any promising women or minorities they are grooming for larger responsibilities and whose professional development might be enhanced by working on an outside board. One strategy for finding competent candidates is to reach out to groups like Martinez’s HACR, the Executive Leadership Council (African-Americans), the Committee of 100 (Chinese-Americans), the Directors Council (Hispanics) and Catalyst (women). Some of these organizations not only identify promising midcareer executives, but also offer training or mentoring programs so that these individuals gain more understanding of boardroom issues.

Ironically, once inside a boardroom, discrimination that may have dogged a person throughout a career seems to vanish, notes Vilma Martinez, founder of the executive recruiting company Directors Council and a partner in the law firm of Munger, Tolles & Olson in Los Angeles. Once someone reaches the pinnacle of corporate achievement—being named to a board—she says other directors seem to become color- and gender-blind. Colleagues, she points out, “actively look for your contributions; they assume they will be of value. Your views are solicited and listened to; you are seen as an accomplished individual and not as a token.” Recruiters agree, noting that in the current regulatory climate, CEOs and directors do not want to be seen as simply “talking to themselves,” in Shultz’s words. “There is a growing sense that there needs to be diversity in order for boards to be accountable to their shareholders and stakeholders,” she adds. “Companies that resist that trend are going to be in the minority in the 21st century.”

Suzanne McGee is a New York-based freelance writer who specializes in financial markets, philanthropy, corporate finance, corporate governance and the art world.

Illustrations by Ken Orvidas