ESG & Diversity
Kezia Farnham Image
Kezia Farnham
Senior Manager

Breaking down the lavender ceiling should be a board imperative — how can you achieve DEI, and what are the business benefits when you do?

June 24, 2021
0 min read
LGBTQ+ board members sitting at laptop, discussing the lavender ceiling

Today’s corporate focus on ESG (environmental, social and governance) issues is very welcome, but one obstacle to diversity and inclusion remains stubbornly resistant: the lavender ceiling. The lavender ceiling is the barrier faced by LGBTQ+ people, akin to the glass ceiling women have traditionally encountered in the workplace. These ceilings limit career progress and stifle diversity at organizations’ upper levels. What role do today’s boards play in dismantling the lavender ceiling, and what steps are needed to remove it?

What Is the Lavender Ceiling?

The term “lavender ceiling” has been in use since the 1990s; lavender as a term and color has historically been used pejoratively in relation to LGBTQ+ people and since been reclaimed by the LGBTQ+ community as an expression of Pride. The lavender ceiling refers to an unofficial upper limit imposed on LGBTQ+ people’s careers. The pink ceiling is a term also used to describe the difficulty of LGBTQ+ employees reaching the upper echelons of the workplace and may be used interchangeably with the lavender ceiling.

Why the S in ESG Is Growing in Importance

Discussions on environmental, social and governance (ESG) issues have tended to focus on climate and the environment. There is a growing recognition, though, that while climate and the environment remain a priority, the S also needs attention as social issues grow in importance. A 2020 article from the Harvard Law School Forum on Corporate Governance found it “increasingly clear that factors which fall within the ‘S’ of ESG are as common as (and for some companies more so than) those within ‘E’ and ‘G’ in contributing to business risk and, in turn, causing lasting damage to a company’s reputation.” The” social” of ESG spans a broad range of issues, from ethical supply chains that endorse fair labor policies to diversity and inclusion strategies in the workplace — where the lavender ceiling is, of course, a key consideration. The importance of these social concerns are increasingly recognized concerning:

  • A broader conversation about social injustice: 2020 saw social inequities called out globally, whether these related to the pandemic’s impact on different socio-economic groups, racial inequality or the #MeToo movement.
  • Business risk strategies: As the Harvard Law School article points out, social issues can be as prevalent in creating business risk as the ‘E’ and ‘G’ of ESG.
  • Corporate performance:Business integrity makes good business sense. Acting in a socially responsible way has been shown to correlate with strong corporate performance; Ethisphere’s 2021 World’s Most Ethical Companies honorees outperformed a comparable index of large-cap companies by 7.1 percentage points in the five years to January 2021.

All of which are very pertinent to the issue of LGBTQ+ diversity, equity and inclusion. Having a more diverse board (and organization) can help to tackle ESG’s ‘S’ and improve your corporate reputation and performance via better decision-making and all-embracing strategies. Collectives lobbying for greater board diversity — like the Diverse Corporate Directors’ Coalition — are increasingly vocal about the need for and benefits of inclusion and diversity. In addition, there is a growing regulatory and legislative imperative for socially responsible businesses — again, particularly with relevance to the lavender ceiling. In the U.S., the Senate is considering several proposals for legislation on diversity disclosures under the heading By the Numbers: How Diversity Data Can Measure Commitment to Diversity, Equity and Inclusion (DEI). Last year, boards were urged to revisit their organizations’ policies after the Supreme Court ruled that employment discrimination based on sexual orientation and gender identity was unlawful. The pace of legislative pressure on organizations to tackle diversity, equity and inclusion issues is accelerating. In tandem, we have seen growth in stakeholder activism, which has moved organizations to align their corporate purpose and business practices more closely. This increasing focus on the S of ESG, particularly related to LGBTQ+ issues, is clearly a positive. However, it does bring challenges. The ‘S’ is perhaps the least tangible of all the ESG focus areas, making it difficult to quantify current performance, set objectives and measure improvements. DEI KPIs might seem straightforward in purely statistical terms — the percentage of representation on boards and across organizations, for instance. When it comes to measuring inclusion, things can be less clear-cut. Fortunately, there are steps boards can take to set goals and measure progress towards them — more of which below.

How Big an Issue Is the Lavender Ceiling? — Exploring Diversity in Today’s Boardrooms

There’s no doubt that the lavender ceiling is an ongoing reality for today’s LGBTQ+ employees. The Human Rights Campaign Foundation’s 2018 report A Workplace Divided: Understanding the Climate for LGBTQ Workers Nationwide found that nearly half (46%) of LGBTQ workers in the United States were closeted in the workplace. When we look to the higher reaches of leadership, fewer than 0.3% of Fortune 500 board directors were openly LGBTI (the I being ‘intersex’) in 2020.

LGBTQ+ workers are woefully underrepresented within corporate boards and executive committees; further, 358 Fortune 500 companies do not have a board diversity policy in place. The lavender ceiling appears to be alive and functioning. In the HRC Foundation survey, 31% of LGBTQ employees reported feeling unhappy or depressed at work, and 20% have searched for a different job. The consequences are clear: a lack of diversity, equity and inclusion drive a lack of employee motivation and loyalty, leading to talent attrition with all its attendant time and cost implications.

Why Does Board Diversity Matter?

Who benefits from a diverse, inclusive workplace? It may be the morally right thing to do, but are there also business benefits from taking down the lavender ceiling to create a more LGBTQ+-friendly board? In short, yes. Numerous studies evidence the benefits of increasing diversity on your board. As part of their Visibility Counts diversity report, Out Leadership has collated more than 30 pieces of research that demonstrate benefits, including:

  • Decreased groupthink
  • Improved decision-making
  • Heightened innovation
  • Risk mitigation
  • Improved corporate brand
  • Ease of talent attraction
  • Investor demand
  • Access to new markets
  • Increased shareholder return
  • Increased employee engagement and motivation
  • Closer connections with customers
  • Lower staff turnover

There are also external imperatives, regulatory and otherwise. Nasdaq is pushing to require the thousands of companies listed on its stock exchange to include women, racial minorities and LGBT individuals on their boards. Companies that fail to meet the requirements without disclosing a reason why risk being de-listed from the Nasdaq exchange. Commenting on the move, Nasdaq Chief Executive Adena Friedman cited “many studies that indicate that having a more diverse board […] improves the financial performance of a company as well as lowers the risk profile of companies.”

These benefits are ongoing; there are also more topical advantages. How does diversity benefit a business in times of crisis? Looking at the issue through the lens of the coronavirus pandemic, Out Leadership argued that the prevalence of a virus that disproportionately impacts older men is itself a powerful imperative for more diverse boardrooms. The risk climate overall has changed dramatically in recent years. Every seat at the board table really matters in terms of that individual’s offering to your risk mitigation strategy; finding ways to build a more diverse board brings diversity of thought and perspectives to help you take a rounded approach to the challenges you face. And COVID-19 hasn’t only highlighted the need for diversity in the context of succession planning and risk mitigation.

The pandemic has also upped the importance of softer, social factors in investor due diligence; the launch of funds focused specifically on ESG principles speaks to an increased interest in what sits ‘under the bonnet’ of investments. The challenge for companies wanting to evidence their diversity policies and determination to demolish the lavender ceiling comes in measuring these non-financial, less tangible metrics. This is something boards are grappling with as ESG disclosures become more commonplace — and something we explore in more detail below.

Are Boards Currently Tackling Diversity and Inclusion Effectively?

Addressing the lavender ceiling is an imperative for today’s board’s — understanding the reasons for its existence and working to break them down by addressing their own composition and extending this throughout the business. Boards play a vital role in defining and building the talent pipeline. The FT reports that the main problem here is that “boards tend to hire people like them” — in other words, boards made up of typically heterosexual and white males will perpetuate this in their pipelines. Board members tend to have long tenures, making it harder to drive change and underscores the importance of getting it right when appointing new members. The saying goes that “If you always do what you’ve always done, you’ll always get what you’ve always got.” This is as true for boards as elsewhere — many boards have approached recruitment and succession planning in the same way for a long time, often with insufficient accountability and reviews in place to question long-standing approaches. The time is right for an overhaul of board diversity strategies.

3 Steps You Can Take to Dismantle the Lavender Ceiling in Your Boardroom

What practical steps can the CEO, board chair and nomination board governance committee take today to break down the lavender ceiling?

  • Implement robust practices around board evaluations and recruitment.

Be brave and challenge assumptions around what a board member looks like. The general counsel and corporate secretary can influence nomination chairs which may be stuck in an outdated mindset.

One key challenge is that board recruitment tends to be based on networks and “who you know,” perpetuating challenges for traditionally overlooked candidates. Diligent’s Director Network can help here, offering the largest and most diverse network of board members and board-ready talent in the world. Building a more diverse candidate list is made easy when you can tap into the broadest range of potential candidates rather than relying on your usual routes.

  • Consider your corporate culture.

The fact that 46% of LGBTQ workers are closeted at work tells us that many do not feel comfortable being open about their sexuality in the workplace. Inadvertently, many diversity policies “other” the LGBTQ+ community via a diversity-focused culture of “them” rather than an inclusiveness-centered culture of “us.” Shifting from an emphasis on diversity to an ethos of inclusion is vital.

  • Consider how you currently support LGBTQ+ individuals who are open in your organization.

What facilities are provided (think about bathrooms that address the needs of all your employees)? What policies do you have in place? Are jokes and conversations overlooked when they should be challenged? Is there a whistleblowing service to report anything out of line? From the macro to the micro, addressing the things that can make work uncomfortable for LGBTQ+ employees is an essential step in removing the lavender ceiling.

We know you want real change, not to practice rainbow washing. So, what are other considerations?

  • Start good behaviors at board level.

Don’t exempt board members from any diversity and inclusion training or reviews – they should lead the way. Does the board exemplify an inclusive culture that celebrates the LGBTQ+ community and helps them succeed?

Many boards struggle to identify and measure the KPIs needed to evaluate current performance and monitor improvements. Diligent’s ESG Solutions can be invaluable here, enabling boards to capture the less tangible metrics around diversity, inclusion and behaviors, identify areas for improvement and measure progress.

Making the Business Case for Dismantling the Lavender Ceiling

The arguments for a focus on board-level inclusivity and diversity are manifest. Creating a modern leadership approach is vital if you’re serious about improving D&I on your board and capitalizing on LGBTQ+ talent that may previously have been overlooked or underrepresented. Diligent’s ESG Solutions can support you in operationalizing your objectives here. At the same time, our Director Network enables you to tap into a rich resource of diverse, board-ready executives. It’s a ready-made talent pool to facilitate your search for more diverse board members and help you make real strides in breaking down the lavender ceiling.


Your Data Matters

At our core, transparency is key. We prioritize your privacy by providing clear information about your rights and facilitating their exercise. You're in control, with the option to manage your preferences and the extent of information shared with us and our partners.

© 2024 Diligent Corporation. All rights reserved.