Latino Representation on Corporate Boards

by Susan Angele and Annalisa Barrett

Board diversity — and disclosure — is poised to remain a focal point during the 2023 proxy season. Stakeholders continue to raise their expectations for board diversity of skills, expertise, gender, race/ethnicity and sexual orientation, along with transparent disclosure of the board’s composition. Boards are being asked to demonstrate that they represent the diversity of their company’s customers and employees and the communities in which their company operates.

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More than half of the respondents to a BLC survey indicated that if they were to rebuild their board to best meet their company’s needs now and, in the future, the composition of the board would be different. Respondents identified race and ethnicity as the top type of diversity they were lacking and actively recruiting for that would be most beneficial to the board based on the company’s long-term strategy. 

A report by the KPMG Board Leadership Center and the Latino Corporate Directors Association (LCDA) highlights the continued underrepresentation of Latinos on boards. Latino representation on Fortune 1000 boards finds that Latinos held just under 4 percent of board seats among Fortune 1000 companies in 2021 despite comprising nearly 20 percent of the U.S. population.

These numbers are low in the context of the growing role of Latinos in U.S. society. The Latino population is expected to grow to 28 percent of the U.S. population by the year 2060. In 2019, Latino consumers contributed $2.7 trillion to the U.S. GDP. While impressive for its size, the U.S. Latino GDP is most noteworthy for its growth, which is driving U.S. consumption growth. From 2010 to 2019, Latino real GDP grew 57 percent faster than the broader U.S. economy. Furthermore, Latinos are estimated to comprise 78 percent of net new workers from 2020 to 2030. 

The number of Latinos on corporate boards does not reflect the evolving composition of U.S. workers and consumers: The percentage of U.S. Latinos on Fortune 1000 boards has increased by only 1 percent since the KPMG BLC and LCDA released their first joint report in 2019. In 2021, there were still no Latinos on the boards of more than two-thirds of public Fortune 1000 companies. It also remains uncommon to find more than one Latino on a Fortune 1000 board. Supply is not an obstacle — there is a strong and growing pool of qualified Latina and Latino candidates with expansive business experience ready to contribute effectively in the boardroom.

Latino Board Representation by Industry 

The food, beverage and tobacco; engineering and construction; and business services industries are the industries with the highest percentage of public Fortune 1000 companies with at least one Latino director, as well as the highest percentage of Latinos on their boards. However, it is notable that no industry has more than 7 percent of its board seats held by Latino directors. Compared with the nearly 20 percent of the U.S. population that identifies as Latino, Latinos are significantly underrepresented in public Fortune 1000 company boards across all industries. The food, beverage and tobacco industry are the only one in which most companies have at least one Latino director. 

Latino Director Demographics 

Latino directors are also more likely to be female and younger than their fellow Fortune 1000 board members. Just over one-quarter of all directors serving on public Fortune 1000 company boards are female, in comparison with one-third (33 percent) of Latino directors. This represents a slight increase since 2020, when 30 percent of the Latino directors on public Fortune 1000 company boards were female. In general, Latino directors are slightly younger than all public Fortune 1000 directors; the average age of the Latino directors is 60, while the average age of all public Fortune 1000 directors is 62. This is not surprising, given that half of the Latino directors joined their boards within the last five years.

Stakeholder Expectations for Board Diversity  

Expectations for board diversity and disclosure continue to evolve, keeping this issue high on the agenda for boards heading into 2023. Nasdaq’s Board Diversity Rule requires most companies to disclose their board’s diversity statistics, with subsequent deadlines requiring listed companies to have at least two diverse directors or explain why they do not.

Many institutional investors say they plan to vote against the nominating and governance(nom/gov) committee chair, nom/gov committee or entire board for a lack of board diversity and/or relevant disclosure. Proxy advisory firms have strengthened their voting recommendations for board diversity and disclosure and may recommend voting against the nom/gov committee chair or other nom/gov committee members at companies with no director from an underrepresented community, or nom/gov chairs at companies that don’t disclose information about the board’s racial/ethnic minority composition.

Institutional investors generally accept board racial and ethnic diversity disclosure that is aggregated (i.e., the number/percentage of directors identifying with each racial and ethnic category) or done by individual (i.e., directors are identified by name with their race and ethnicity). Nasdaq also asks for aggregated racial and ethnic board diversity disclosure through the Board Diversity Matrix. However, the Russell 3000 Board Diversity Disclosure Initiative, led by the Illinois state treasurer, requested in 2022 that Russell 3000 companies disclose the race and ethnicity (as well as gender) of individual board members — potentially leading to disclosure of individual director demographic information more broadly. 

Several states, such as Illinois, require board diversity reporting for public companies headquartered there. And despite being struck down, California’s board diversity mandates regarding underrepresented communities and women — AB 979 regarding underrepresented communities and SB 826 regarding women — likely have had some impact. A KPMG BLC analysis of data provided by ESGAUGE shows that one-third of board seats of S&P 500 and Russell 3000 companies headquartered in California are held by women, compared with just over one-quarter of board seats of companies headquartered elsewhere. California-based companies are also more likely to disclose the individual racial and ethnic categories to which their directors belong.

While the full impact of the SEC’s universal proxy rule hasn’t yet been realized, individual director nominees may face greater scrutiny, and proxy contests targeting one or two board members for replacement may become more frequent. An activist nominating a director who brings a diverse, important lens to the board may be more likely to succeed in having that director elected, particularly if the existing board is not representative of the demographics of the company’s key stakeholders.

Action Steps for Boards 

This slow progress in Latino representation on Fortune 1000 boards is a reminder that there is still much work to be done despite improvements in board diversity. And it is not just Latinos who are underrepresented in U.S. corporate boardrooms. Data analyzed by the KPMG BLC show that: 

  • Women still only hold 32 percent of board seats of S&P 500 companies and 28 percent of seats at Russell 3000 companies. 
  • African Americans represent 14 percent of the U.S. population but hold only about 10 percent of public Fortune 1000 board seats. 
  • There are no Asian directors on the board at two-thirds of public Fortune 1000 companies. 
  • Individuals who self-identify as LGBTQ+ comprise 7 percent of the U.S. adult population but hold less than 1 percent of board seats at S&P 500 and Russell 3000 companies. 

Boards and their nom/gov committees should prepare for heightened scrutiny of board diversity and related disclosures in 2023, considering the following: 

  • Is the board truly representative of its employees, customers and communities? Where are the gaps? 
  • What areas should the board focus on to improve inclusion and diversity of thought and background (e.g., director search criteria, board refreshment, director onboarding, board culture, board leadership skills)?
  • What are the expectations of the company’s key stakeholders for board diversity and related disclosures? 
  • How do the company’s board diversity and disclosures compare to its peers and leading practices? 
  • What aspects of director diversity are disclosed? Do they include gender identity, racial/ethnic categories and LGBTQ+? Are directors’ demographic backgrounds disclosed in the aggregate or individually by name? How can these disclosures be improved? 

Shareholder engagement and disclosures should emphasize the progress the board has made toward diversity, as well as plans to address any gaps. Stakeholders have demonstrated their resolve to hold boards accountable for failing to take appropriate steps, and boards should be ready to discuss and demonstrate their board diversity strategies in 2023. 

Susan Angele and Annalisa Barrett are senior advisors with the KPMG Board Leadership Center (BLC).