In some respects, America’s most powerful companies are placing a greater emphasis on racial equity than ever before. Several consumer brands—often accused of sidestepping controversy—assumed an advocacy role in the wake of George Floyd’s death. Nike ran a video on social media in which the apparel giant asked the audience not to “pretend there’s not a problem in America.” Amazon, meanwhile, pledged $10 million for nonprofits focusing on “justice and equity.”

Internally, many organizations have talked about change for some time. The number of chief diversity officers at Fortune 500 companies, for example, has soared over the past few years, according to the leadership advisory firm Russell Reynolds Associates.

Still, when it comes to who’s actually running preeminent organizations, executives from minority groups remain remarkably hard to find. Too often, experts say, they fail either to find young talent or help them advance through the management pipeline. 

Key Takeaways

  • Latinx and Black executives represented only 3.4% and 1% of Fortune 500 CEOs, respectively, in 2020.
  • Boardrooms are only slightly more diverse than top management, although the number of Black directors increased after the death of George Floyd.
  • Research suggests that more diverse companies are more profitable than those that are more homogeneous. 

Race and Power in the Fortune 500

CEOs

Hispanic people represent the largest minority group in the United States, comprising 18.5% of the total population, according to the latest census data (which uses the term Hispanic). However, at Fortune 500 firms only 17 Latinx executives served as the chief executive officer (CEO) in 2020, according to an analysis by Richie Zweigenhaft, an emeritus professor of psychology at Guilford College, whose research often focuses on race and gender in corporate America. That’s a scant 3.4% of top jobs at America’s leading companies. 

And while African American people make up about 13.4% of the country, only five were CEOs last year, says Zweigenhaft, coauthor of Diversity in the Power Elite. That means only 1% of Fortune 500 chief executives are Black. (Jide Zeitlin has since stepped down as the head of the luxury goods company Tapestry, although Roz Brewer will join the list when she takes the top spot at Walgreens in March.) Asian Americans fare only slightly better, claiming 2.4% of CEO spots. That’s still well below their 5.9% share of the overall population.

Number of Minority CEOs at Fortune 500 Companies
Source: Richie Zweigenhaft, co-author of Diversity in the Power Elite

What’s striking is how little those numbers have changed over the past decade, despite all the discussion about diversity in corporate circles. Even when Brewer takes the reins at Walgreens, the number of Black CEOs will be one fewer than it was in 2010. The needle hasn’t moved for leaders with Asian or Pacific Islander backgrounds either.

Latinx executives are the one ethnic group that has seen some improvement. Latinx representation among Fortune 500 principals has nearly doubled since 2010. Even so, their 3.4% share of CEO spots today is still less than their nearly one-fifth slice of the overall population. 

Boardrooms

And what about the boardrooms that help steer these enormously influential companies? Minoritie populations are somewhat better represented, although in most cases they still bear little resemblance to their customers. According to a 2018 “Missing Pieces” report by the accounting firm Deloitte, African American people held 8.6% of Fortune 500 director seats. Latinxs and Asian people served in 3.8% and 3.7% of those roles, respectively.

Fortune 500 Board Members by Race
Source: Deloitte, "Missing Pieces Report" (2018)

Smaller Companies

At smaller companies, members of minority groups are more likely to be in key leadership positions, but here again the data suggests a long way to go before America reaches something resembling racial equity. For example, the U.S. Bureau of Labor Statistics, which collects data across the entire economy, reported last year that Latinx individuals comprised only 7.4% of all chief executives; Black executives held 4.3% of these jobs. Among minority ethnic groups, only Asian American executives came close to their overall share of the population, with 5.4% of top leadership roles.

The Elusive Quest for Diversity

For diversity advocates, there are some recent signs of progress at the boardroom level, in no small part due to the national discussion of racial disparities in the wake of the killing of George Floyd.  Last year a group of prominent executives and investment firms created the Board Challenge, which asks corporations to add an African-American director within 12 months. And Institutional Shareholder Services, a powerful advisory firm, announced that its research reports would start calling out large companies “that lack racial and ethnic diversity.”

Efforts like these seem to be bearing fruit. The recruiting platform BoardProspects reported that companies in the Russell 3000 named 130 Black directors in the five-month period after Floyd’s death. In the five-month period prior, they only hired 38. The question is whether such progress will be sustained over time. And while changing the look of boardrooms is important and challenging in itself, tackling the lack of minority leadership in the C-suite is an even bigger hurdle. Experts say most companies simply lack a strong pipeline that delivers Black, Latinx, and Asian American executives to top leadership positions.

Or perhaps companies just don't look hard enough. “There is no shortage of minority candidates who can compete for these jobs,” Dick Parsons, former head of Time Warner and chairman of Citigroup, told USA Today last year. “It’s not that they get overlooked. They don’t get looked period.”

Minority group members who find employment at top companies report facing pervasive biases that hinder their advancement. A recent survey by McKinsey & Company found that minority employees were, for example, more likely to report being excluded from social activities with coworkers or having to correct false assumptions that colleagues made about their personal life.

Zweigenhaft suggests that disparities in socioeconomic status, which often correlate to race, have been another serious impediment when it comes to recruiting and promoting new workers. “This, I believe, helps to explain why there has been an increase in the number of white women CEOs and, though less of an increase, in Latinx CEOs,” he says. “A more careful look at where they have come from reveals in both cases that they are likely to have been born to economic privilege.”

Greater equity does more than keep stakeholders happy—it can also improve the bottom line, according to a body of research on the subject. For example, a separate analysis by McKinsey found that companies that ranked highest in ethnic and cultural diversity were 33% more likely to lead their industry in profitability.

Additionally, a 2018 study by Boston Consulting Group concluded that greater minority representation at the top also leads to more innovation. Companies with above-average diversity in their management teams generated significantly more income from products launched within the past three years than less-diversified companies. “People with different backgrounds and experiences often see the same problem in different ways and come up with different solutions, increasing the odds that one of those solutions will be a hit,” its authors noted.

The Bottom Line

While the number of Hispanic CEOs at Fortune 500 companies has grown over the past decade, Black and Asian representation remains stagnant. Research suggests that increasing diversity, in addition to being a moral imperative, can help companies succeed financially.