Improving Diversity in C-Suite Positions
Women hold just 25% of C-suite positions — including the chief financial officer post — and only 7.8% of CEO positions. People of color fare even worse, holding just 16% of all C-suite posts. In CPA firms, women hold 27% of partner positions.
Major hurdles to improving diversity in executive leadership may include the lack of mentors and race and gender bias. Overcoming these barriers requires more than recruiting diverse talent for entry-level positions. Diversity begins at the executive level.
Executive leadership diversity can nurture professional growth for women, people of color, and other underrepresented groups. Based on available research, this page explores racial diversity and women’s representation in the workplace.
Why Diversity in Leadership Matters
Research shows that executive teams with gender and racial diversity lead to more innovative, profitable, and engaged companies. Diverse companies also make better investment decisions and reduce risks by 30%. Read on to discover more reasons why diversity and inclusion practices are important.
- Improved Bottom Line
- Diversity improves profitability. Researchers at McKinsey & Company discovered that organizations in the top quartile for diversity on their executive teams outperformed their peers by 25%. McKinsey found that the greater the diversity, the greater the bump in profitability. In fact, a performance gap of 48% separates the most diverse organizations from the least diverse.
- Better Investments
- Research from Harvard Business School revealed that diversity improves investment profitability in venture capital companies. Hiring 10% more women partners led to a 1.5% improvement in investment profitability. Diverse employees also better prepare their organizations for uncertain competitive markets.
- Greater Innovation
- According to a Deloitte article, diversity enhances innovation by 20% and reduces risks by 30%. In addition, diverse organizations execute their initiatives with great skill and speed since an inclusive culture boosts employee engagement. Research showed that the key differentiator was inclusive leadership at all corporate levels.
- Stronger Talent Acquisition
- By the year 2045, experts project that people of color will constitute the majority of the U.S. population. This demographic shift means that maintaining a sufficient workforce requires recruiting a diverse team. Inclusive, culturally intelligent leadership can draw a broader set of applicants.
- More Varied Perspectives
- Decision-making drives 95% of business performance and 50% of employee engagement, according to one study. Diversity and inclusion help organizations consider multiple perspectives when making decisions. The study also reveals that diverse teams make better decisions 87% of the time. Age, gender, and geographic diversity each contribute to decisions that improve business performance.
According to a Deloitte article, diversity enhances innovation by 20% and reduces risks by 30%.
Historically, accounting leadership roles have excluded two major groups — women and people of color. Overcoming bias around sex, gender, and race is critical to achieving diversity in accounting leadership. Although more students of color are majoring in accounting, the majority of CPAs and firm partners are white, according to a 2019 AICPA report.
Women in Accounting
While 96% of Fortune 100 companies claim to promote diversity, only 7% have a woman as CEO, according to a 2021 IMA report. The numbers look a little more promising for CPA firms, where women hold 27% of partner positions and make up 51% of full-time staff. Still, 73% of women in the IMA report claimed that bias against women negatively affected their promotion.
However, companies are making dedicated efforts toward including women in accounting leadership. For example, the AICPA Women’s Initiatives Executive Committee developed a roadmap to help CPA firms enhance their gender diversity. This program and others like it can help overcome a lack of mentorship opportunities for aspiring women executives.
The recent push toward hybrid work and work-from-home opportunities may also help women advance their accounting leadership careers. Flexible work environments can make it easier for employees to manage other responsibilities, along with job duties and career development.
People of Color in Accounting
People of color hold about 16% of all C-suite positions. Among Fortune 100 companies, 26 have no ethnic or racial diversity at the executive level. Moreover, many of the C-suite positions held by people of color do not represent high-level positions such as CEO or CFO. In fact, the CFO post is the least likely executive position for a person of color to hold.
Organizations such as the National Association of Black Accountants (NABA) have made efforts to increase educational access in the accounting field. NABA awarded $347,000 in scholarships between 2019 and 2020.
People of color hold about 16% of all C-suite positions.
The organization also has an accounting awareness program for high school students from underrepresented groups. Students at the high school, college, and graduate levels may join NABA and take advantage of benefits such as education, conferences, and networking.
Increasing numbers of Black and Latino/a people are choosing accounting-related majors at the undergraduate and graduate levels. However, this has not translated into significant cultural diversity in leadership at accounting firms.
Ways to Increase Diverse C-Suite Executives
Improving diversity in accounting firms begins even before formal recruitment starts. Accounting firms should expose students to the financial professions before they reach college.
Firms also need to foster conversations among team members. Open dialogue can lead to employee growth and stronger teams. Continued training in diversity, inclusion, and equity using resources from professional accounting associations can also help improve the workplace.
Develop Mentorship Programs That Promote Diversity
Mentorship programs that promote diversity, equity, and inclusion can help underrepresented employees pursue executive positions. These initiatives can help meet target goals like increasing engagement from LGBTQ+ employees or team members from different racial and ethnic backgrounds.
An effective mentorship program starts with a clear goal, measurable objectives, and tools to evaluate the outcomes. Mentors and mentees should include underrepresented groups and from majority groups. Members of underrepresented groups should be included at all levels of the program but should not have to do all the work of making the program thrive.
Professional accounting organizations such as the NABA and The International Society of Filipinos in Finance and Accounting may provide resources to help firms develop mentorship programs that improve diversity.
Expand Recruiting Efforts for Leadership and Diversity
More people from historically underrepresented groups are attending college. Although accounting represents a stable, respectable, and well-paying profession, it has not proven attractive to many graduates from underrepresented communities.
One survey showed that students from Black and Latino/a communities demonstrated little interest in accounting careers when asked to rate the profession. However, interest jumped significantly after the same students received information about careers in accounting. This research suggests that connecting students to information may be key to improving diversity in recruitment.
In addition, first-generation college students could benefit from accounting-related scholarships and other financial aid for underrepresented students.
C-Suite Executive Diversity Initiatives
In June 2021, Deloitte introduced Making Accounting Diverse and Equitable (MADE), an initiative to increase racial and ethnic diversity in the accounting profession. The company contributed $75 million to make MADE a reality.
The Deloitte Foundation expects to fund another $30 million in scholarships over the next six years. Deloitte is working with Historically Black Colleges and Universities and Hispanic-serving Institutions as part of this initiative.
A few months later, CliftonLarsonAllen LLP, one of the ten largest accounting firms in the U.S., announced that it was partnering with the NABA on a work-study program. Designed to widen CliftonLarsonAllen’s talent pipeline, this diversity initiative works across universities to expand campus outreach into underrepresented communities.
PwC LLC, a third large accounting firm, also announced diversity goals. The company aims to make 35% of its new hires be Black or Latino/Latino, and 50% of partners be women or from an underrepresented racial or ethnic group.
Common Questions About Diversity in the C-Suite
Angelique Geehan works to support and repair the connections people have with themselves and their families, communities, and cultural practices. A queer, Asian, gender binary-nonconforming parent, Geehan founded Interchange, a consulting group that offers anti-oppression support. She organizes as part of several groups, including the National Perinatal Association’s Health Equity Workgroup, the Health and Healing Justice Committee of the National Queer and Trans Asian and Pacific Islander Alliance, QTPOC+ Family Circle, and Batalá Houston.
Angelique Geehan is a paid member of the Red Ventures Education freelance review network.
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Angelique Geehan works to support and repair the connections people have with themselves and their families, communities, and cultural practices. A queer, Asian, gender binary-nonconforming parent, Geehan founded Interchange, a consulting group that offers anti-oppression support. She organizes as part of several groups, including the National Perinatal Association’s Health Equity Workgroup, the Health and Healing Justice Committee of the National Queer and Trans Asian and Pacific Islander Alliance, QTPOC+ Family Circle, and Batalá Houston. Angelique Geehan is a paid member of the Red Ventures Education freelance review network.
Featured Image: 10’000 Hours / DigitalVision / Getty Images
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