Q&A with Stephen Sadove: A Director’s View of Diversity

Stephen I. Sadove is the former chairman and CEO of Saks Inc. He is currently a principal at Stephen Sadove and Associates and a founding partner of JW Levin Partners, an advisory and investment firm. Sadove serves as a lead director of Colgate Palmolive and Ruby Tuesday, and also serves on the boards of Aramark and JC Penney. In addition, Sadove chairs the board of trustees of Hamilton College.

We spoke with Sadove about the value of diversity on the board: why it’s needed and how to get it.

We see boards that are eager to add diverse candidates. What do you see from the perspective of a longtime CEO and director?

Sadove: I clearly see boards needing to recruit diverse directors. The starting point should always be, “Why do we want to add diversity?” I believe that there are sound business reasons and that it shouldn’t be just for the sake of diversity. You have to start with an understanding that there is value in a diverse board and that it leads to better results.

What is the payoff for the board?

Sadove: In my experience, there is enormous value in having diverse points of view represented on the board—whether those represent gender differences, geographic, ethnic—people of different backgrounds. There is an art to assembling such a board. When you do this right you get better quality of discussions, including people asking smart questions you may not have considered, and better business results.

How can boards get there?

Sadove: Boards have to understand not only the value of having diversity but how they get it and then ensure it remains a priority. That requires leadership to drive it at every level—the chair, the head of the nominating committee, as well as other directors. They all have to recognize the value of diversity and make sure it is part of every search.

If diversity is so desirable, what’s taking so long?

Sadove: Very good progress has been made in the area of diversity; it is in many of the position specs for director searches. One of the limitations has been that many companies have been going after the same candidates.

What is the solution?

Sadove: You have to start weighing and looking at talent in out-of-the-box venues, such as nonprofit and smaller companies, or down a level from CEO at the functional level—not where you might traditionally be searching. Scarcity of diversity at the top is one of the reasons we don’t see the level of diversity we would like on boards. However, when you get beyond the CEO and into the functions, there is a wide range of diverse candidates who could be terrific board members if given the chance.

What does diversity look like from the board’s point of view?

Sadove: You have to balance the value of having a sitting or ex-CEO on the board versus the desire to add a director with digital, IT or financial expertise, for example, or someone with international, specific regional or even regulatory experience. That depends on the nature of the particular demands of the business and the industry. But generally speaking, diversity should look like a mosaic for an individual company. The role of the governance committee and the board is to do some very hard work on a board skills matrix to determine what is needed today and what will be the most important skills to add in the future.

What are some of the challenges of integrating diverse candidates on the board?

Sadove: Integrating new directors is always important and a challenge, regardless of their background, because each board has a different way of operating. You have to have an understanding of the board and company cultures, so onboarding and orientation are critical to effectiveness as a director. Onboarding issues can be compounded when someone joins from a less-traditional background, but by and large, new directors are all bright and quick studies. With the right support they adapt well even if they haven’t run a company.

What is the role of leadership in ensuring a diverse board?

Sadove: Leadership—executive leadership and on the board—is critically important in ensuring a diverse culture and especially important in establishing a diverse board. The tone is set at the top. In my experience, less-traditional candidates make some of the best directors.