Allison Leopold Tilley joins host Joel Simon in the second episode of the Director Advisory Resources miniseries to share insights into diversity initiatives and the benefits of diverse boards.

Joel Simon:

Hi, and welcome to Pillsbury’s Industry Insights Podcast, where we discuss current legal and practical issues in finance and related sectors. I’m Joel Simon, a finance partner at the international law firm, Pillsbury Winthrop Shaw Pittman. Today, our guest is Allison Leopold Tilley, a partner in Pillsbury’s Corporate Practice. Named one of the top “Women Leaders in Tech Law” by The Recorder for five consecutive years, Allison advises technology companies, including on their formation, venture capital financings, M&A transactions, IPOs and other securities transactions and board governance. Allison not only represents startups and emerging growth entities, but also advises venture capital firms, entrepreneurs and multinational public companies. As counsel to both acquirers and target companies in the tech sector, she has closed billions of dollars of M&A deals and is a recognized leader in her practice areas. Thanks for joining us today, Allison.

Allison Leopold Tilley:

Thanks Joel, it’s great to be here.

Joel Simon:

We’ve selected a topic that’s been front and center business news but seems to be gaining even more momentum lately. I know you’re passionate about this topic and I can’t wait to hear your perspective on it—diversity in the boardroom. Perhaps you can give our listeners a little background on this issue and then talk about some recent legislative developments in California that are helping to drive progress in this area.

Leopold Tilley:

Joel Simon:

I agree, Allison. Although it does seem like now might be a good time to see more progress. Because in addition to legislative initiatives, there’s also been a strong push by activist investors and asset managers, such as BlackRock, StateStreet, CalSTRS and CalPERS. Can you tell us more specifically about some of these efforts and the impact they are having?

Leopold Tilley:

I am happy to do so and I might add given the timing of while we are recording this, Joel, that we now have our first female Vice President-Elect. So hopefully that will have some impact on the role, as well.

Joel Simon:

I have also noticed that a number of the activist investors and asset managers are actually publishing the numbers of board slates that they have voted against as a way to show they are really putting their money where their mouth is. I know that California often receives a lot of criticism for what some people view as overreaching or imposing their unique views on companies that have no choice but to comply because of the importance of the market, but it often turns out that California is ahead of the curve on issues that eventually develop a broad following and are later recognized as having been the right thing to do all along. Motor vehicle emissions and safety are an obvious example; it seems to me that board diversity will be another one. I know there is an intuitive sense that these developments are the right policy, but isn’t there empirical data to support them as well?

Leopold Tilley:

There definitely is. As for overreaching, since California’s rules apply to both California incorporated companies but also a company’s headquarters, a lot of people think that they don’t have the ability to regulate companies that are headquartered here, and only the companies that are incorporated here. Thankfully, nobody has taken this to court—and I don’t think any company wants to be poster child suing against diversity—so at the moment everyone is working to comply with this. For those that are data driven, there is a lot of information out there as to why this is a good idea from a business point of view versus just a socially good thing to do.

Joel Simon:

Indeed!

Leopold Tilley:

And then there was a very interesting article that just came out in September on Boardmember.com. Don Knauss, who is on the boards of Target, Kellogg and McKesson, stated that he thinks management needs to focus on its core processes in current times and that the key to doing so is having the relevant skill sets and the diverse skill sets and points of view on the board governance level. He that that requires a broad mix of perspectives—gender, racial, cultural, age and even industry experience—and that having that wide spectrum of expertise leads to more robust discussions at the board level. He also noted that there is evidence that a heterogenous group does a better job of getting to the right solution than a homogenous group and that is more and more important today when businesses are facing these unprecedented times or a global pandemic and trying to figure out how to manage themselves and how to adapt. Having a diverse board helping them navigate through these difficult times is a proven benefit.

Joel Simon:

It sounds like the stars may have finally aligned to really make these efforts successful, combining legislation, grass roots support and data to back it all up. To wrap up, can you tell us how companies have been reacting to these developments?

Leopold Tilley:

I think companies are taking them seriously. They are understanding not only the requirement of having a diverse board but the benefit as well. We noticed that there is a lot of activity in the recruiting of female board members and in new interest with the new California regulations in first starting to have existing boards self-identify, so a company knows what their landscape is and then reaching out to recruiters and networks to find a more diverse board candidates. I can tell you that numerous boards that we work with, most of them had at least one female director but now they are very actively focusing on adding more female directors and becoming more diverse in gender, ethnicity, sexual orientation—all the different diversities. They are very focused on increasing that representation on their board. I have a client that is just about to go public that has a board of seven people, of which five are women. To me, that is amazing, and it shows there is a real evolution in what the boardroom is going to look like.

Joel Simon:

That’s excellent. Allison, I’ve really enjoyed chatting with you about these board diversity developments and the impact they are having on companies. Thank you so much all your great insights.