BLM in the Boardroom

When Black Lives Matter (BLM) protests began in the United States, it took a couple days of stunned silence before social media platforms started being flooded by corporate messages.

Unfortunately many of them were missives from business leaders about their own anguish at seeing how Black folks are treated at the hands of the police. An awakening as it were.

Then came promises of donating between $1M to $100 M to activist organisations and matching employee contributions. Some brands such as Ben & Jerry’s (“Dismantle White Supremacy”) were more believable than others because for them, it was not expedient (read their 2016 statement on Black Lives Matter).

It is embarrassingly easy to find that many organisations, who put out long missives, had few (read: none or one) people of colour on their boards and in their leadership teams, leave alone the broader workforce. As of writing this — 15 June 2020 — I am yet to see a public pledge where business leaders have committed to driving real inclusion in their boards and their leadership teams, setting goals, and publishing metrics and details of how they intend to go about it.

Taking this action is the bare minimum boards should do to drive inclusion, the low hanging fruit.

Boards need to go beyond, by seeking to understand the BLM movement, and slavery legacy and its lingering impact in modern life, including modern corporations, to drive accountability while discharging board director duties.

***

A few things of differing complexity and scope are already on board agendas.

One of the things boards in the UK sign off is the annual statement on modern slavery and human trafficking, as required by Section 54 of the Modern Slavery Act (Transparency in Supply Chains) for commercial organisations with a turnover over £36 million.

These sign-offs depend on assurances sought from the senior leadership teams of the organisations that there is no modern slavery and human trafficking in the organisation’s supply chain.

If as a board director, you think that these issues do not affect your organisation, you may find this analysis sobering.

(C) Economist magazine, 2018

It says: “Many countries present clear-cut illustrations of modern slavery. China imports $1bn-worth of coal a year from North Korea, dug out by miners who toil because of an inherited-worker status rather than out of choice (a tenth of North Korea’s population is thought to be forced to work for the state). The cotton industry in Central Asia depends on migrant labourers; in Turkmenistan tens of thousands of people are forced to pick cotton to fulfil state production quotas. India’s huge brickmaking industry in Andhra Pradesh relies on families working in bonded labour.

And also: “A survey in 2017 by the Chartered Institute of Procurement and Supply found that only 6% of managers at British firms were certain their supply chains are untainted by modern slavery.”

Board directors must seek more than assurance and representations. It is crucial to ask questions and probe deeply. Understanding slavery legacy makes it a smidgen easier to ask the questions required. And the questions can help clarify current and emerging risks — another thing boards sign off on.

Then there is the complex, evolving space of ESG where definitions are fluid but where investors are demanding accountability on many fronts.

Racism is an ESG problem“, says John Streur, the CEO of Calvert, a responsible investing firm; he has also called on companies to disclose racial diversity and pay equity in their workforce. “It’s also important through ESG to take into account things like diversity. How does a company actually hire? What are its hiring practices? Is it diverse throughout its broader business operations?“: Mona Naqvi, head of ESG product strategy at S&P Dow Jones Indices, who runs the S&P 500 ESG Index, recently noted.

***

These governance issues — signing off compliance statements, identifying emerging and present risks, ESG impact — are complex and multifaceted, and crucially, rapidly evolving.

Boards, that do not have a sophisticated understanding of slavery legacy and anti-racism, are at a disadvantage. They may struggle to initiate a meaningful discussion on the impact of BLM on their businesses and organisations, and to plan for and direct the required changes to build a modern, inclusive organisation. Failing to do the work would be a disservice to their shareholders and stakeholders.

(Disclaimer: These are my own views and do not reflect the views of the boards of JP Morgan US Smaller Co.s Investment Trust or Temple Bar Investment Trust or London Metropolitan University, where I serve as a non-exec director.)