Tesla has bucked its trend of appointing mostly men to its board of directors. And the move could mark a new direction for other Silicon Valley companies as they make their leadership teams more diverse.
“We’re very excited that Tesla has named Linda Johnson Rice to the board,” Ronald C. Parker, chairman of the Alliance for Board Diversity, tells CNBC Make It. “Tesla is an innovative company and we’d like to see more blacks and women in these tech spaces.”
Tesla’s announcement this week marks a break from the more common appointment of white males to board positions.
A recent study by the Alliance for Board Diversity and Deloitte shows that white men maintain the most board seats at Fortune 500 companies, although the percentage of women and minorities has increased in recent years. Caucasian men hold 69.2 percent of the seats analyzed, followed by Caucasian women who hold 16.4 percent, according to the study.
Prior to Rice’s appointment, only two women have served on Tesla’s board in the company’s 14-year history. The first is Laurie Yoler, who was on the board of directors from 2003-2006 and then the board of advisors from 2008-2013. The second is Robyn Denholm, who was appointed to the board of directors in 2014.
“Women make 85 percent of the purchasing decisions in the household so to have that female perspective on a board is beneficial,” Parker, who is also the president and CEO of the Executive Leadership Council, says. He adds that in black households, the percentage is even higher.
Rice could not initially be reached for comment, and Tesla had no comment on the appointment.
A diverse boardroom benefits a company in many ways. First, there’s a diversity of skill and thought to ensure companies are successful, Deb DeHaas, vice chairman and chief inclusion officer at Deloitte’s center for board effectiveness, tells CNBC Make It.
The move also creates a catalyst for more diverse hires across the company, she adds.
“Companies like Tesla that are innovative and forming their board for the first time have a unique opportunity to be leaders in bringing in diversity, which results in good governance,” says DeHaas.
“If these companies want growth then they need these diverse perspectives to take on new strategies,” says Parker.
Historically, tech companies have been slow to hire women and minorities for senior-level positions. In fact, women hold just 14.1 percent of executive positions at Silicon Valley companies, according to a report from the law firm Fenwick & West LLP.
Dan Lyons, a journalist, author and former writer for HBO’s “Silicon Valley,” has been vocal about the lack of diversity in tech.
He tells CNBC the issue “begins with this bro culture, with this idea that we’re going to invest in … guys who all look like Mark Zuckerberg or Travis Kalanick.” He says, “It’s like the stupidest way in the world to hire people.”
Lyons points to companies like Google and Facebook as places where people of color are underrepresented. In fact, both companies released diversity reports showing that they still largely employ white males.
Google’s annual diversity report illustrates that about a third of the staff is Asian, two percent are African-American and just 31 percent are women. Facebook’s 2016 report shows that over half of its workforce is white, 33 percent are women and only two percent are African-American.
Twitter has also joined the list of tech companies releasing diversity reports. Its 2016 report shows that the company is 57 percent white, 32 percent Asian, three percent black, four percent Hispanic/Latinx and 37 percent female.
Notably, the company has taken strides with the 2016 appointment of Debra Lee, chief executive at BET Networks, to its board. A year later, the company hired Candi Castleberry Singleton as vice president of inclusion and diversity.
As for Tesla, the automaker does not release information on its gender or racial makeup — a standard practice at other high-profile tech companies. However, after being called out by Fortune for its all male leadership team in 2014, the company said this in a statement:
“Diversity is one of the many factors we consider when hiring and recruiting, and we are fortunate to benefit from a wide range of backgrounds, perspectives, and ideas from our employees. This diversity will remain a key feature of work life at Tesla going forward.”
There has been some progress across industries. For example, sandwich chain Potbelly appointed Susan Chapman-Hughes to its board in 2014.
Even with this momentum, progress remains slow, says Parker.
How can companies diversify their boards? First, by dispelling the myth that there aren’t enough women and minorities with the required skill sets, says DeHaas.
In fact, she often has companies tell her they would love to be more diverse but can’t find the right people. “This is not a supply issue,” DeHaas says. “There are highly competent women and minorities that can excel in this group.”
She also advises that companies refrain from recycling the same people and hire outside of the usual group of CEOs, CFOs and COOs. These positions are usually filled by men, which means that companies that choose from this talent pool likely miss women and minorities with the necessary skills.
Rice, for example, brings a wealth of experience from her businesses and the roles she’s had across the boards of different organizations, says DeHaas.
Parker, meanwhile, hopes that Tesla’s recent hire will inspire other companies to add more women and minorities to executive positions.
At the current pace, “it would be 2026 before reaching the target of 40 percent diversity,” says Parker. “We must find ways of accelerating representation.”
Like this story? Like CNBC Make It on Facebook.
Tesla just welcomed this CEO to its board. Here’s why it’s a big deal for Silicon Valley