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Corporate America loves the Rooney Rule. But does it work?

(Bloomberg) — Corporate America has borrowed its favorite diversity initiative from the National Football League. But the “Rooney Rule”—the practice of interviewing minority candidates for top jobs—has not led to more black head coaches, or a more diverse C-suite.

In recent years, the Rooney Rule has gone from barely mentioned in the corporate world to being adopted by at least 100 public companies to recruit people at all levels, amid the backdrop of a national count on race, George Floyd It was sparked by the murder of 2020. Police.

But as more companies agree to release detailed information about the diversity of their workforce, the data paints a similar pattern. While women and people of color, particularly black and Hispanic employees, are well-represented in the lowest run of company employees, there is little and sometimes no representation in the most powerful roles. According to the U.S. Equal Employment Opportunity Commission, as recently as 2018, black and Hispanic workers made up less than 5% of the top executive roles. Experts agree that little progress has been made since then, and that the popularity of the rune rule has done little to bring about change.

“It’s really like checking the box to say ‘We have Rooney Rule, look how progressive we are,'” said Alina Polonskaya, global leader of the D&I practice at Korn Ferry, executive recruiter who headed the corporate Have researched the effectiveness- Diversity Initiative.

The reality, she said, is: “There are a lot of companies that are just doing it for show.”

Typically, when companies adopt the Rooney Rule, they commit to adding at least one candidate to their interview slate to increase gender and racial diversity. This is usually not enough to spur real change. Even in the NFL, the Rooney Rule was amended in 2020 to require at least two underrepresented candidates for head coach vacancies.

Ilana Wolfe, head of corporate board engagement at Goldman Sachs Group Inc., said women and people of color may face more questions about their readiness for the role than other applicants.

This means that even when more women and people of color are interviewed, they are often not hired.

Wolfe has assisted 45 underrepresented directors by the bank in finding a board seat with Goldman customers in 2020, announcing that it will no longer reduce initial public offerings of companies with a board whose members are all were straight, male and white. She says that only with the Rooney Rule, and without a more comprehensive drive toward inclusivity, companies may be forced to make hiring decisions that feel “familiar.”

“I worry that the Rooney rule, while perhaps good in its intentions, does little to actually drive board diversity,” Wolff said.

To make a meaningful impression, hiring managers must interview a slate of candidates that is 30% diverse, said Korn Ferry’s Polonskaya. Companies can also set their executive ranks to a standard of gender and race breakdown of generally more-diverse entry-level employees, he said, adding that employers should also use the same diversity standards they use for new hires. are applying for. People are being considered for promotion.

Polonskaya noted that such an initiative is still very rare.

One model of success in hiring Black and Latinx employees can be seen in Twitter Inc., which saw significant gains in attracting people of color last year. The company used Rooney Rule-style initiatives, but cited its change to a “work from anywhere” model as a key factor in the improvement. The company actively targeted recruits from areas with high populations of Black and Latinx workers.

In contrast to the minimal effect of the Rooney Rule increasing diversity among corporate executives, boardrooms of S&P 500 companies have made recent strides in inclusivity due to external pressures. BlackRock Inc. and Vanguard Group Inc. As investors have been asking companies to improve the diversity of their boards. Nasdaq Inc. will require its index members next year to disclose the diversity of its board, and eventually those companies will either have to comply with the policy or explain why they won’t. California has laws that require a wider range of gender diversity as well as those that are leading several boards to make changes.

Meanwhile, employers have not faced the same external scrutiny over their C-suites. Left to their own devices, companies haven’t moved the needle much when it comes to executive diversity.

It’s not just Rooney Rules that is falling flat. When it comes to diversity initiatives, most companies are going for the low-hanging fruit: Three-quarters have diversity festivals, 67% have developed diversity vision statements and 64% have subliminal bias training, About 1,700 officers in the US and Canada according to a Corn Ferry survey.

But only 42% focus on developing a similar talent process, and just a third say they intentionally create diverse and inclusive teams. The survey showed that a quarter reported having development programs for underrepresented groups.

The “Rooney Rule” first appears in a 2013 U.S. corporate regulatory filing, referred to in ballot proposals by the Comptroller and Pension Fund of New York City, asking Freeport-McMoran Inc. and CF Industries Holdings Inc. to their boards. Diversity recruitment policies have been called for. For an analysis of filings from 2003, when the NFL first adopted the rule, through February. The non-binding proposal was approved by CF shareholders, and the controller stated in a report at the time that it was the first instance of a diversity proposal receiving majority approval.

Of the nearly 100 mentions of the Rooney Rule since then, three-quarters came after the May 2020 murder of Floyd.

The first time this practice was positively mentioned by a company in regulatory documents was in March 2019, when both Humana Inc. and Alexion Pharmaceutical filed proxy statements indicating that they had taken Rooney in their board searches. The rule was added. Pressure to adopt this method increased after the New York City comptroller sent a letter in October 2019 that did not have a Rooney Rule-style process for board selection, adding 56 companies to one.

Applying the Rooney Rule in proxy proposals is a way for companies to initiate change, said James MacRitchie, an active investor, even if more is needed beyond the measure. McRitchie has sponsored hundreds of proxy proposals about social and governance issues over the decades, including two failed proposals at the Clorox Company and Procter & Gamble Company to refer to the rule in 2021.

“It’s at least one way to get companies to think about it, but there’s not a lot of hammering out there,” McRitchie said, a gesture that many companies will do more “than making a true behavioral change.” Has happened. “It’s something we have to fight constantly against.”

A fresh introspection on the Rooney Rule began in February when former coach Brian Flores sued the NFL over its hiring practices, saying in his lawsuit that the Rooney Rule was not having its intended effect. There are currently five head coaches of color in the NFL. As recently as the end of the 2018 season, there were eight. After meeting with civil rights leaders including Al Sharpton, NFL commissioner Roger Goodell said the league was evaluating the Rooney rule.

Sharpton, leader of the National Action Network, said that inspired by the controversy in the NFL, civil rights leaders intend to bring similar scrutiny on diversity in corporate executive teams. When it comes to hiring underrepresented candidates, companies should have similarly detailed goals, with specific deadlines, as they do for earnings and sales, he said in an interview.

“The threat of the Rooney regime’s abuse of intent far exceeds the achievement,” Sharpton said. “Because corporations can do what the NFL has done, and can go through the motions. So we get the light of inclusion, but not the reality of inclusion. And that’s not what we want.”

To contact the author of this story:
Jeff Green at Southfield [email protected]

© 2022 Bloomberg LP

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