Amazon says it is simply formalizing a practice that was already in place, but the company’s new policy pledging to consider “a slate of diverse candidates, including women and minorities” for future openings on its board of directors is being called a key moment in the quest to increase diversity on corporate boards.
“Oftentimes when Amazon acts, others follow,” said Shannon Gordon, the new CEO of theBoardlist, a marketplace with a mission of putting more women on public and private company boards.
Amazon’s decision to formally adopt what’s known as the “Rooney Rule,” announced on Monday, followed a controversy over the board’s initial opposition to a shareholder proposal that sought to require the company to include qualified women and minority candidates on the initial list of candidates for the board. In its original response to the proposal, the company said it already took diversity into account as part of the process, and recommended that shareholders vote against the proposal as a result.
That sparked a backlash among some employee groups, as reported by Recode last week, and public criticism from Black and Hispanic members of Congress, as reported by The Hill.
Amazon VP of Public Policy Brian Huseman announced the reversal in a letter Monday to U.S. Reps. Yvette Clarke, Robin Kelly, Bonnie Watson Coleman and Emanuel Cleaver II, co-chairs of the Tech Accountability Caucus. He wrote, “We reached this decision after listening to your feedback as well as that from Amazon employees, shareholders, and other stakeholders about the Board diversity proposal. These conversations led us to reconsider both our decision on the shareholder proposal and how we explained our initial recommendation.”
The company formalized the policy change in a filing with the Securities and Exchange Commission.
“I can confirm that the Amazon Board of Directors has adopted a policy that the Nominating and Corporate Governance Committee include a slate of diverse candidates, including women and minorities, for all director openings,” a company spokesperson said. “This policy formalizes a practice already in place.”
Amazon currently has seven men and three women on its 10-member board. All of its board members are white.
The “Rooney Rule” is named after the NFL policy that has significantly increased the racial diversity of head coaches in the professional football league since its 2003 adoption.
“We know that a diverse board leads to improved financial outcomes,” said theBoardlist’s Gordon. “And the other thing we know is that one of the barriers to diversity is that candidates often come from a homogeneous pool. There’s a first-order network of either the CEO, the board, or the investors. TheBoardlist is a tool to help source candidates from second, third, fourth-order networks. In other words, to help companies get exposure to candidates who might otherwise not surface.”
At the same time, she said, it’s just one tool that companies could adopt. “There are many ways to drive diversity, and I think each company will figure out ways to hold themselves accountable and put metrics and goals forward to drive diversity.”
Amazon also needs to improve the diversity of its executive team, writes the University of Colorado’s Stefanie K. Johnson, associate professor of management and entrepreneurship at the Leeds School of Business, in a Harvard Business Review article, noting that 17 of its 18 highest-level executives are white men.
“Clearly the company’s employees care about increasing diversity in the upper ranks, and Amazon stands to gain by being more representative of the people it serves,” Johnson wrote. “Appreciating the need for diversity, and setting some real goals for achieving it at the highest levels, is the only way to ensure that it exists throughout the organization.