Recently on The Huffington Post, Peter Dreier and Gregory Squires made a provocative argument: "It turns out that the gender and racial make-up of a bank's board of directors has little influence on whether it acts responsibly toward consumers (including women and minorities) and traditionally underserved communities." Their Exhibit A was Wells Fargo, which both has one of the more diverse boards in banking and recently agreed to pay $175 million to settle claims of discrimination against Latino and African-American borrowers. This and other questionable Wells Fargo practices, Dreier and Squires argued, show that having women and minorities on a corporation's board doesn't change the company's behavior.
They made a valid point: Much as we should encourage diversity at the top levels of big companies, we shouldn't expect that simply checking off demographic boxes will, all by itself, transform corporate culture. That's true, but reality is a bit more complex than their article suggests. And that more nuanced view shows that yes, diversity matters.
Large corporations don't turn on a dime. They're more like great, lumbering battleships that change directions rather slowly -- often too slowly. One only need look at the U.S. auto industry, which, a decade ago, was slowly improving efficiency and quality, but not enough to avoid being overtaken by foreign-based competitors. A much more drastic transformation began at GM and Chrysler after the financial crisis of 2008 sent them to the edge of oblivion, but that transformation, in personnel and methods as well as product lines, is still very much a work in progress nearly four years later.
In the case of Wells Fargo, the diversity of its board is a relatively new phenomenon. As recently as the Greenlining Institute's 2009 report on bank board diversity, Wells' board had 19 total members, including one Asian, one African American, and one Latino -- just 16-percent people of color, half the current representation Dreier and Squires cite. Because the $175-million discrimination settlement covered the period from 2004 to 2009, the more diverse current board had no influence on those actions. Yes, some of the problematic activities the article cites have continued into more recent times, but to what extent that reflects the influence of newer board members is unclear. Boards don't run the day-to-day affairs of large companies; they chart a course that executives then have to steer. In a few years we may have a better sense of how that process is playing out at Wells.
But all this misses the larger picture. To their credit, Dreier and Squires acknowledge that "these high-powered executives provide role models for young women and young people of color, so they can aspire to fulfill their potential in whatever careers they wish to pursue." And there is scientific evidence that exposure to diverse leadership can help break down prejudices.
But even these factual arguments don't capture the full picture. The actions of large banks like Wells Fargo or Bank of America affect all of us, whether or not we're their customers. The leadership of huge institutions whose behavior affects all of America should look like America. That means going beyond just including representatives from assorted demographic groups. It means recruiting members from a variety of backgrounds and experiences. Can we prove that a bank's handling of, say, payday lending would be different if it had board members who grew up in neighborhoods with payday lenders on every block? No. But having someone in the room who's seen their real-world impact sure couldn't hurt.
Right now America feels like an increasingly fractured, divided place. The horrific massacre at a Sikh temple in Oak Creek, Wis., perpetrated by a man with white supremacist beliefs, is only the latest and most grotesque example. And the rush in the media to explain that Sikhs aren't Muslims, while in one sense entirely understandable, makes me a little queasy. Anti-Muslim prejudice, it seems, doesn't shock us much anymore. Nevertheless, America's diversity is inescapable. Indeed, even the "hate rock" embraced by the Wisconsin shooter has its musical roots in American black music. As writer Randy Blazak noted the other day, "Anchored in the 12-bar blues, the music of white supremacy is, formally speaking, a tribute to Chuck Berry as much as anything else." Even our bigots are multicultural, whether they know it or not.
I'm not saying that having a few more minorities on corporate boards will guarantee an end to tragedies like Oak Creek, but if we are to transcend the divisions that threaten to tear us apart, all our institutions must play a role -- even when the results aren't easily quantifiable.
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