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AESC INSIGHTSDIVERSITY AS A BUSINESS IMPERATIVEJune 2015A report from the AESC:The voice of excellence for executive searchand leadership consultants worldwide.www.aesc.orgThe Association of Executive Searchand Leadership Consultants

The Association of Executive Searchand Leadership ConsultantsAESC – the Association of Executive Search and Leadership Consultants– was founded in 1959. We’ve grown and evolved since those early daysto an association of hundreds of member firms in nearly 75 countriesaround the world. We represent the full rangeof firms: large and small, domestic and global. Asa truly global association we know the value ofdiversity, and see it in practice, first-hand throughthe eyes of our members. Whether it’s finding andassessing diverse talent, building diverse leadershipteams, or working with clients to create an inclusiveculture that harnesses the power of diversity,our members appreciate the importance of diversityas a business imperative, and can help clients capture the enhancedbusiness results that diversity affords.The AESC membership adheres to a strong code of professional practiceand standards of excellence, which codify our commitment to diversityand inclusion. As standard procedure, AESC members identify the mostqualified talent without bias, and are known to challenge the status quo,presenting candidates beyond the “usual suspects.”Our members understand that creating a diverse culture is more thanmetrics. We know that diverse teams drive innovation and generatefresh perspectives. For us, diversity is not just about checking boxes forspecific categories of people.Clients who partner with an AESC member significantly increase theirability to find, recruit, and retain the best diverse talent around the world.Whether a client’s objective is to increase gender diversity on the board,build a truly global leadership team reflective of the marketplace, or ensurethat leaders have different backgrounds and experiences to enhanceinnovative thinking, clients can count on AESC members to deliver.To your continued success,Karen GreenbaumAESC President and CEO2

“IBM thinks about diversity the waywe think about innovation—bothare essential to the success of ourbusiness. When we innovate, technologybecomes smarter for clientsand creates new opportunities forgrowth. When we incorporate diversityinto our business, we createbetter innovations and outcomes.IBM has embraced diversity, andit gives opportunities for IBMersand our clients to achieve their fullpotential.”- Virginia M. Rometty, Chairman,President and Chief Executive, IBMAESC MEMBERS GET RESULTSThe Association of Executive Search and Leadership Consultants (AESC)recognizes that diversity is a business imperative with direct implications fororganizational success. As trusted advisors to those companies that driveeconomies, lead innovation, and compete across vital sectors and geographies,we know first-hand the power of diverse corporate leadership. Our memberfirms are uniquely positioned to advise our clients on the talent that will givethem a competitive edge.AESC member firms already lead the industry in helping clients build inclusiveboards and executive ranks by finding highly-qualified top talent that might nototherwise be identified. Our members possess the access, the resources, andthe experience necessary to help organizational leaders extend their reach. Wehave a proven track record of delivering results that meet your business needs.A standard source for board positions and new corporate leadership is “whoyou know.” But how does a leadership team seeking to capture the diversityadvantage find and attract potential leaders from outside of their circles? Ourmembers have deep relationships and credibility with a vast array of diverse,high-performing executives.AESC members are also in the best position to accurately and objectively assessclients’ readiness to effectively harness diversity of thought, and can assist clientsin attracting, retaining and leveraging the full potential of diverse people.As trusted advisors, we provide clients with our best, most informed counsel.That includes the business case for diversity, and the urgency with whichleading companies must compete for and leverage diverse executives. Wehave both the opportunity and the obligation to introduce our clients to newpossibilities, and help them reap the potential of new perspectives.We are well-positioned to identify and attract talent that may be underrepresented.This helps accelerate the natural pace of achieving the benefits ofdiversity at higher levels, effectively building a strong pipeline.Building a diverse pipelineAs objective talent experts, AESC members have a unique insight into thepipeline for diverse candidates. While there has been tremendous progressin many countries around the world in bolstering the ranks of women in theboardroom, this hasn’t always carried through to the executive ranks.AESC members work with their clients to ensure that we correct the statusquo of the past and cultivate a pipeline of diverse talent. This is essentialto maximize the business case for diversity of thought and to generatesustainable change. If an organization believes in diversity in the boardroom,they should be working with their executive search and leadership advisorsto develop a plan for building a strong pipeline of diverse leaders to createsustainable change.Copyright © 2015 AESC. All Rights Reserved.3

At the core of our companyphilosophy is the principle of respectfor the individual. This fundamentalcommitment to respect guidesHonda in all of our businessoperations. It fosters the kind ofinnovation and vitality that enablesus to dream big and create productsand technologies that make people’slives better. We embrace diversityacross all levels of our business, fromour associates to our suppliers toour dealers.Honda’s diversity statementLenovo employees represent a talentedand diverse workforce. Maintainingthis diversity and achievingthe full potential of this diversity isa business priority fundamental tothe Company’s competitive success.What do we mean by “diversity?”An organization could be considered “diverse” if women and minorities arerepresented on the board, in the executive suite, and within the employeepopulation. But this is more than a numbers game. Successful organizationslook beyond diversity metrics and recognize that building an inclusiveculture is vital to leveraging the benefits of a diverse workforce.Demographic diversity refers to, but isn’t exclusive to, variables includinggender, race, religion, national origin, disability, sexual orientation, age,geographic origin and more. The value in demographic diversity is inaccessing the resulting diversity of thought.Richard Branson, Founder of Virgin Group, says: “Over more than 40 yearsof building our businesses at the Virgin Group, my colleagues and I haveseen time and time again that employing people from different backgroundsand who have various skills, viewpoints and personalities will help you tospot opportunities, anticipate problems and come up with original solutionsbefore your competitors do.” Organizations that cultivate diversity ofthought and harness the power of unique perspectives are achieving acompetitive advantage through increased innovation and creativity.For the AESC, diversity means both demographic diversity and a culture ofinclusion that values diverse perspectives and leverages the full potential ofthose differences.Lenovo’s diversity statement4

Inclusion and diversity have been afocus for me throughout my time atApple, and they’re among my toppriorities as CEO. I’m proud to workalongside the many senior executiveswe’ve hired and promoted in thepast few years, including Eddy Cueand Angela Ahrendts, Lisa Jacksonand Denise Young-Smith. The talentedleaders on my staff come fromaround the world, and they eachbring a unique point of view basedon their experience and heritage.Tim Cook,Chief Executive Officer, AppleThe spending power of the LGBTcommunity exceeds $3 trillionglobally.Forbes Magazine, 2013Why diversity?The business case for diversity is not new, but research continues tosupport the premise that leading employers have known for decades:that diversity and inclusion are directly related to higher-achieving teams,innovation, better access to key markets, improved recruiting and retention,and healthier organizations. Multiple sources point to several compellingconclusions:• Diverse organizations are more successful in recruiting and retainingtop talent. “Diversity in leadership can help a company secure access tomore sources of talent, gain a competitive recruitment advantage, andimprove its global relevance.” [McKinsey]• Organizations that harness the unique leadership styles related todifferent demographic groups tend to bring about improvements inorganizational health, financial performance, risk management, andethical standards. In 2015 McKinsey predicted that diverse companieswill significantly outperform non-diverse companies, identifyingdiversity as a competitive advantage over time.• The collective process of discovery from different points of view leadsto more innovation, and more business success. Research published in2013 by the Harvard Business Review reports that diverse “employeesin a ‘speak up’ culture are 3.5 times as likely to contribute their fullinnovative potential.”• A leadership team that is reflective of a business’ major customer base,likely provides key insight and strategies.• Customers and clients prefer to work with businesses that reflect thecustomer base.“The story is about organizations with a more diverse talent pool,especially at senior levels, manifesting a workplace culture of openness,merit and rational decision-making. At heart, the story is one of diversityand inclusion of all employees, so that a richer knowledge bank is fullyleveraged and better business outcomes are achieved.”[Deloitte]Copyright © 2015 AESC. All Rights Reserved.5

Addressing gender diversity andequality is a business and growthchallenge. It is a key priority whichimpacts not only the performanceof our organization, but also itsreputation as world-class employer.For many reasons gender diversityand equality is no more an optionbut a business imperative!Jean-Pascal Tricoire, Chairman andChief Executive Officer atSchneider ElectricPepsiCo needs a team that reflectsthe diversity of our consumers.And that starts with creating aworkplace where everyone feelswelcome, including our gay, lesbian,bisexual, and transgender employees,suppliers, trade customers andpartners. Creating a culture of respectand trust is part of PepsiCo’svalues and it’s the source of ourstrength in the marketplace.Indra Nooyi,Chairman and CEO at PepsiCoWhy diversity now?In addition to the business case for diversity, the battle for top talent isfierce, and increasing pressure from within clients’ regulatory and economicenvironments requires that organizations make serious effortstoward diversity.• Diversity often leads to open, inclusive leadership styles, which, accordingto diversity expert Lauren Leader-Chivee, are “essential skillsto global competitiveness. If you don’t have them…you are very likelypositioning yourself to go the way of Kodak or any number of companieswho were poorly prepared to meet the rate of change in theglobal marketplace and to innovate in time.”• The demand for talent is increasingly global. Worldwide HR consultingfirm Mercer identified that rapid economic growth in SE Asia, forexample, “has increased the demand for talent, in some cases strainingthe ability of local labor markets to keep up. In response, companiesare widening their gaze, reaching out to talent pools that theymay have overlooked in the past.”• Organizations can no longer afford to ignore different demographicgroups. With an aging workforce and skill shortages – particularly forscience, technology, engineering and mathematics careers – the qualityof leadership appointments could be greatly enhanced by broadeningthe pool of eligible candidates. In the United States and Europethere has been gender parity in the number of teenagers enteringhigher education since the 1990s, with women now overtaking menin many disciplines.• Corporations with significant buying power, e.g., Coca-Cola, Novartis,Johnson & Johnson and Marriott International now demand diversityin the companies they hire for services. Diversity is continuing tohave direct economic implications for organizations.Diversity expert and Huffington Post contributor John Fitzgerald Gateswrites “leading-edge CEOs are practicing ‘strategic diversity’ to harnessbusiness value. They recognize that diversity is not just about people; it isabout every complex situation, decision, task, and perspective that imbuestheir companies.”6

Barclays ensures that employees ofall backgrounds are treated equallyand contribute fully to our vision andgoals. By deploying a global diversityand inclusion (D&I) strategy whichnow plays a significant part in ourBalanced Scorecard, the diversityof our employees is embedded intoour journey to becoming the ‘Go-To’bank. Our five global agenda pillars ofgender, LGBT (Lesbian, Gay, Bisexual& Transgender), disability, multigenerational,and multicultural, ensures thatwe cater for the entire network ofdiverse employees at Barclays.Barclays’ diversity and inclusionstatementAttracting Diverse Talent: Executive Leadership and BoardsOur members value diverse leadership. They are well-positioned toidentify the most qualified talent by searching and assessing without bias.Our Code of Professional Practice (see page 10) specifically addressesthe importance of diversity and inclusion for our profession. As trustedadvisors, clients have come to expect AESC members to think creativelyand, at times, challenge them to think outside the box. AESC memberconsultants know how to align executive talent strategies with businessstrategies and culture to enhance business success.Attracting Diverse Executive Talent: Best Practice FrameworkWhether the assignment is focused on identifying top talent for Boardsor Executive positions, the following is a brief “best practice” frameworkto ensure success. Of course, the most important first step is selectingthe right consulting firm to ensure success. By selecting an AESCmember, clients know they have selected a firm that is committed to thehighest level of professional standards in the industry.Succession planningPartner with their clientsto identify the balance ofexperience and skills needed.Diversity goalsUnderstand the clients’aspirational goals on balance andgender diversity more broadly.Candidate supportProvide appropriate support,especially to first-timecandidates, to guide themthrough the process.Long listsPresent a diverse long list ofhighly-qualified candidates,selected with rigor and alignedwith clients’ diversity goals.Demonstrate creativity andfresh thinking when consideringcandidates.Defining briefsIdentify relevant skills,competencies and personalcapabilities, not just provencareer experience, in orderto expand the talent pool andprovide the broadest range ofqualified candidates.Supporting candidateselectionAdvise clients on how to runan interview process that isrigorous, professional, and avoidsunconscious bias.InductionProvide best practices ininduction and onboardingprocesses to help newexecutives or board memberssettle quickly into their roles.Sharing Best PracticesEnsure that best practices insupporting gender balance anddiversity more broadly are welldocumentedand shared internally.Copyright © 2015 AESC. All Rights Reserved.7

Women’s Share of PublicBoard Seats around theWorld (as of 2014) :Norway 35.5%Finland 29.9%France 29.7%Sweden 28.8%United Kingdom 22.8%Denmark 21.9%Netherlands 21%Canada 20.8%Australia 19.2%US 19.2%Germany 18.5%Spain 18.2%Switzerland 17%Austria 13%Ireland 10.3%Hong Kong 10.2%India 9.5%Portugal 7.9%Japan 3.1%Diversity in the Boardroom• Additional pressure to diversify comes from mandatory and voluntary governmentinterventions. Several European countries have imposed mandatory quotas forfemale representation on boards, and the European Parliament voted for and ispressing the Council of the EU to adopt a directive calling for a minimum 40%representation of each gender among non-executive board directors by 2040.Outside of Europe, certain governments, including Australia, India, Israel and Kenya,have enforced legislative requirements for women on boards.(source: Catalyst)(source: EY’s “Women on US boards: what are we seeing” report)• In recognition of the vital role the executive search profession plays indiversifying corporate leadership, dozens of the world’s leading firms havebecome signatories to a voluntary code of conduct, which recognizes the rolethat executive search firms play in helping clients find and recruit women toserve on their boards and in the executive pipeline.• The “30% Club” movement to place more women on corporate boards began inthe UK but now includes CEO and Board Chair members in key markets aroundthe world – including Hong Kong, East Africa, United States, Ireland, Southern Africa,Australia, and Malaysia. Helena Morrissey, the founder of The 30% Club and chiefexecutive of Newton Investment Management, opposes quotas, which she findspatronizing, and instead is effectively convincing board chairs to lead the change,citing evidence that more diverse boards provide better shareholder returns.8

“I don’t understand why somecompanies and chairmen don’tseem to want to have the bestboards they can. The best boardsare diverse in every sense and yetwe don’t seem to ‘get’ the role andvalue that women play in helpingcreate such an environment!”-Mike McTighe, Chairman, WYG plc• To meet emerging demand for gender diverse boards from businessleaders, regulators and governments, the AESC is a member of The 30%Club and partners with various organizations supporting diversity inleadership, including Women Corporate Directors, Global Board ReadyWomen, and a range of leading business schools.Male and female directors have differing views about the importance of havinggender and racial diversity on their boards. Female directors are far more likelyto consider board diversity important. For example, 61% of female directorsdescribe gender diversity as very important, compared to only 32% of maledirectors. Similarly, 42% of female directors describe racial diversity as veryimportant, compared to only 24% of their male counterparts. These differencesmay be contributing factors to why diversity on public company boards has notincreased substantially in the last five years.(source: PwC’s 2014 Annual Corporate Directors Survey)Shareholders, institutional investors and customers are increasingly urgingboards to diversify. They understand the business value that a diverseboard delivers in terms of business strategy and shareholder value.Copyright © 2015 AESC. All Rights Reserved.9

Our Code of Professional PracticeMembers of the Association of Executive Search and LeadershipConsultants are committed to the highest professional practices, actingin the best interests of their clients, candidates, the community-at-large,and our profession.INTEGRITYAESC members conduct themselves and their business activitieswith absolute integrity and are at all times open, honest, andworthy of trust.EXCELLENCEAESC members focus on their clients’ unique business needs,providing high-quality service and using rigorous, results-focusedmethodologies.OBJECTIVITYAESC members serve as trusted advisors, exercising independent,objective judgment.DIVERSITY & INCLUSIONAESC members value diverse leadership. They identify the mostqualified talent by searching and assessing broadly without bias.CONFIDENTIALITYAESC members always respect any confidential informationentrusted to them by clients and candidates.AVOIDING CONFLICTS OF INTERESTAESC members avoid conflicts of interest with clients andcandidates. Where a potential conflict may exist, members discloseand resolve those conflicts.10

About the Association of ExecutiveSearch and Leadership ConsultantsSince 1959, the AESC has set the standard for quality and ethics in executivesearch and leadership consulting worldwide. Because AESC members mustcommit and adhere to the AESC’s industry and government-recognizedCode of Professional Practice, clients can be assured that AESC membersare able to serve as trusted advisors for their most important engagements.As the voice for executive search and leadership consulting worldwide,today the AESC is comprised of more than 350 member firms, representing8,000 executive search professionals in 70 countries. To learn more aboutthe AESC and its membership, visit www.aesc.org. For information aboutthe AESC’s career service for executive-level professionals, visit www.bluesteps.com.Copyright © 2015 AESC. All Rights Reserved.11

Copyright © 2015 AESC. All Rights Reserved.