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Legacy reigns at top beauty retailers. Here’s why that could hurt diversity.

Promoting women to the C-suite isn’t the only thing beauty brands should have in mind. They also face a reckoning over racial inclusivity.
Danielle Ternes/Retail Dive

Editor’s Note: This article is part of a package on diversity. You can find the rest of the stories here.

In the top echelons of the beauty world, an important year is coming up. The man that has run L’Oréal for 14 years, Jean-Paul Agon, is set to step down in 2021, and a new CEO will take over the beauty powerhouse.

The front-runner on many observers’ minds is Nicolas Hieronimus, another man. Hieronimus has been on the beauty retailer’s executive team for years, finally being promoted to deputy chief executive officer in charge of divisions in 2017.

In a lookback at L’Oréal’s executive team since 2010, Hieronimus was there every year. First, as managing director of the professional products division, then as president of L’Oréal Luxe, followed by a few years as president of selective divisions, and finally in his current position.

He is qualified to take on the CEO role. But the fact that many observers have assumed he will also raises questions about how much of the beauty space is legacy based, and how much that hurts its diversity, especially for more traditional players whose executive ranks have not historically been diverse.

“It’s been widely talked about that beauty companies like Revlon and other beauty companies have long been run by men,” Andy Challenger, senior vice president at Challenger, Gray & Christmas, said. “Only recently are you seeing women take hold of those organizations and run them from the top down. I think that’s a reflection of reality. It’s a reflection of companies starting to understand that their leadership needs to reflect their customer base in a way that’s both good for the organization and good for the customers.”

Instead, a prime chance to hand over leadership at one of the largest beauty brands in the world to a woman may slip by. In reality, it may have slipped by several years ago, when Hieronimus was promoted to be second in command — arguably the ideal position for grooming a successor.

Still, progress is being made at some top beauty retailers. Revlon named its first female CEO, Debra Perelman, two years ago and Mary Dillon has run Ulta Beauty since 2013. Just this September, clean beauty brand Kopari named Susan Kim, a former Huda Beauty exec, CEO, and plenty of startups in the space have launched with diverse leadership.

The challenge for traditional players like L’Oréal lies in rethinking their leadership pipelines, which means change could be elusive for years.

“I think society is ready for the change now. We’re just ready for it — people are ready for it, and there’s a lot of work being done to fix things at the very beginning, but those changes take a long time to have the effect that you want within an organization,” Challenger said. “It’s a complicated thing. It’s important work even though it doesn’t necessarily feel urgent enough.”

The “legacy” of legacy retail

In tracking members of the executive team and the board of directors at key beauty retailers, a few trends emerge.

First, powerhouses Estée Lauder and L’Oréal have a significant number of long-tenured executives, though they also report far more executive team members than Ulta. (As Sephora is owned by LVMH and does not report a full executive team in annual filings, this piece only references Sephora’s CEO of the Americas and CEO overall from 2010 to 2019).

Executive leadership teams at top beauty retailers since 2010

Each rectangle is an executive, with the tenure represented by the length of the rectangle and color used to identify their gender. Click on a rectangle for details on the executive.
Key:
CLICK ANYWHERE IN BOX TO CLOSE
Sephora only includes CEOs, while Estée Lauder, L’Oréal, and Ulta include other executives.
Nami Sumida/Retail Dive

At Estée Lauder, nine executives were with the company for the entire period Retail Dive studied, including two women in the roles of executive vice president of global communications, executive vice president and general counsel, vice chairman and general counsel, and vice chairman. An additional three executives, including one woman (CFO Tracey Travis), have been at the company for eight or more years, counting this year.

L’Oréal similarly had seven executives that stayed with the company for the entire period studied, including one woman (Brigitte Liberman, president of Active Cosmetics) and five executives at the company for seven or more years, including two women in the positions of executive vice president of operations, executive vice president and chief technology and operations officer, chief digital officer, and executive vice president and chief digital officer.

Christopher de Lapuente was the longest-tenured of the two positions examined at Sephora, starting as CEO of Sephora in 2011. Ulta CFO Scott Settersten is the longest tenured there, at nine years, though Mary Dillon, Jeffrey Childs and David Kimbell have all been with the company eight years.

Publicly available information about whether current and former executives identify themselves as non-binary and how they identify themselves racially, is not widely available. This report is based on publicly available information about companies and focused solely on the number of men and women in its analysis of these beauty retailers’ executive teams.

It is important to note as well that Estée Lauder and L’Oréal are both family operations, which, much like the Nordstrom family, means that several executive and board seats go to family members. Outside of the impact of family ties, Lauren Bitar, head of insights at RetailNext, links the long tenure of executives and its consequent impact on diversity to the intense focus on specific definitions of experience at large players.

“You end up seeing this thing where they’re like, ‘We want you to have done the role you’re doing for, like, seven years already,’” Bitar said. “They’re not taking a chance on anybody and they’re not promoting growth or different ideas because they’re just basically hiring you in from the same role that you had, and then maybe you’ll move up more in that company. That just also makes it a self-fulfilling prophecy because you’re not going to get that first job if no one’s going to take a chance on you.”

The emphasis on tenure means that improving diversity further is destined to be a long game. Estée Lauder’s current executive team (based on its company website) is 40% women, L’Oréal’s is 33% women and Ulta’s is 50% women.

Current executive leadership teams at top beauty retailers

Executives at each retailer in 2020
Name Title Gender Tenure

L’Oréal’s representation of women has hovered at 30% or slightly above for several years, but that is an improvement from a period of three years (2011-2013) where the retailer had 20% women in its executive team. The representation of women on Estée Lauder’s current team is markedly higher than it has been in previous years, based on annual documents. Over a ten-year period, the company has consistently had nine male executives and three to four female executives, or 25% to 31% female representation.

Since executive teams are small, however, percentages can change swiftly. If L’Oréal added one woman to the executive team today, for example, its representation of women would go up from 33% to 38%.

“Especially with legacy brands, that good old boys club — it’s still very real,” Bitar said, talking about how executives jump from one brand and show up at another in the space. “It really ends up just being like a revolving door of people.”

The question is whether legacy brands can shift their recruiting to outside of their own inner circles.

Ella Washington, CEO of diversity and inclusion strategy firm Ellavate Solutions, and a professor at Georgetown’s McDonough School of Business, said that companies need to move away from practices that rely on social networks to fill positions. She pointed to the board of directors especially as a space where many positions are filled informally, by a friend of someone on the board, or a friend of a friend.

If legacy retailers want to increase diversity, they should change their recruitment practices and be willing to prioritize diversity, Washington said.

“Are you willing to even think outside of the box in terms of what’s the archetype or the prototype for that leadership position? Oftentimes we try to fill leadership positions based off of what we’re used to, and sometimes what we’re used to is people like us,” Washington said. “And because of that, you don’t allow diverse experiences in the room, you don’t allow people with different backgrounds that maybe don’t have the 20 years of experience within that specific industry, for example, to take on those leadership positions.”

In addition to creating an environment where it’s harder for diversity to flourish, the long tenure traditions at these companies may ultimately be costing them in other ways as well. Catherine Lepard, managing partner of the global retail practice at Heidrick & Struggles, noted that many legacy companies with long-tenured employees are slower to innovate.

The companies that have been most agile about adopting retail trends like omnichannel and DTC are the ones that have brought in new people and perspectives, Lepard said, including those that have been “consciously bringing perspectives from other industries into their organization.”

At the same time, legacy brands and legacy executives also have the ability to be incredibly powerful in driving change elsewhere in the industry through mentorship and creating opportunities for startups. Marla Beck, the CEO and founder of Bluemercury, attributes her success in part to having good mentors to nudge her towards that goal.

Beck initially came up with the idea of selling beauty products online when she heard Jeff Bezos speak, at a time when e-commerce was still very obscure. But she also had several male mentors who pushed her to start her own business. Beck said her father was an entrepreneur and she worked in his accounting department in high school, balancing the books by hand. That gave Beck a financial foundation and business experience at a young age, but she also was encouraged in her pursuits in college.

“‘I actually think you’re an entrepreneur. You should be thinking about that when you graduate — how you’re going to start a company,’” Beck recalls a professor telling her. “Sometimes it takes a champion or mentor like that to see you in a way that’s different.”

Since founding Bluemercury, Beck’s mentors have changed, and she has become a mentor herself to many female-founded companies. Over the years, Beck said she relied on Leonard Lauder in particular, chairman emeritus and director at Estée Lauder, as a source of advice for growing her business.

“He’s been an amazing mentor to almost every female in the industry. I don’t know how he does it,” Beck said. “He taught me how to take the long view, always. Whenever we would get together and talk about business — he was very active in helping me grow Bluemercury — he would say, ‘OK, enough about the current world. What are you going to be doing in 10 years with Bluemercury that’s important to the consumer? And how do you think about that?’”

To change the executives, change the board

While executive teams are, rightfully, a point of focus for improving diversity, the board of directors is also important. At Estée Lauder, the ratio of men to women on the board has been almost exactly the same for 11 years. The gap between men and women, was at its largest in 2017, when the company had nine men and six women. For a period of six consecutive years, the company had just one more man than the number of women on its board.

L’Oréal and Ulta have seen more dramatic changes. In 2010, L’Oréal had three women compared to 11 men on its board of directors, but the beauty retailer flipped to majority women in 2019, when it reported eight women and seven men on its board. Ulta’s board also shifted toward a higher representation of women, which coincided with Mary Dillon’s arrival as CEO.

In 2010, Ulta’s board had one woman and seven men. When Mary Dillon arrived in 2013, it had six men and three women. The year after that (and those following) had either 50-50 representation or very close to it. In 2019 and 2020, the board has been majority women, composed of six women and five men.

The board of directors at top beauty retailers since 2010

Number of men and women on the board of executives for each retailer
Men
Women
Estée Lauder
L’Oréal
Ulta
Nami Sumida/Retail Dive

“That’s a great place to launch change from,” Challenger said of the board of directors. “There’s been a shift in the public, that consumers are demanding equality. They’re demanding diversity from the companies that they frequent and those types of building blocks make me very optimistic that there’s change coming, even though it’s not going to be at a pace anybody’s happy with.”

Challenger also said that in Europe, some countries now have requirements around the number of women on boards, ensuring that the board of directors hits a certain threshold. In the U.S., California just passed legislation that requires public companies to have at least one racially, ethnically or otherwise diverse director by 2021, which followed previous legislation in the state requiring one female director be on the board of every public company. Lepard noted that a 50% gender mix is what many companies should ideally be aiming for, and in the current year, both Ulta and L’Oréal’s boards are above 50% women, while Estée Lauder is slightly under, at 44%.

Having a diverse board of directors can not only influence how executives think about the direction of the business, but also impact how positions are filled in the C-suite, and can therefore lead to more diversity at the executive level as well.

“There’s usually a dividing wall between governing and managing,” Victor Arias, managing director at Diversified Search, said of the relationship between the board and executive team.

“There’s a lot of areas that have to be touched to create the best sort of DE&I environment, but I will tell you that trying to make the changes at the management level is a lot easier when you have representation on the board,” Arias added.

And representation on the board, in many areas, is still forthcoming. A 2018 report by Deloitte and the Alliance for Board Diversity, which compared the consumer industry to several others, including financial services and media, found that of 1,821 total board seats in the consumer space, 23.8% were held by women. Even fewer people of color made it to the board level. According to the report, which was emailed to Retail Dive, 84.5% of board seats were held by White or Caucasian board members in 2018, compared to 8% held by African American or Black members, 3.5% by Asian or Pacific Islander members, 3.9% by Hispanic or Latino members and 0.2% by those that identify as “Other.”

Consumer companies also had the largest percentage of companies with 0% board diversity, at 3%. In addition, 28% of the 159 consumer companies it measured had greater than 40% board diversity, which was among the smallest percentages of the industries measured. The greatest percentage came from the technology, media and telecommunications space, in which 42% of the companies had greater than 40% diversity.

Consumer companies did have the highest percentage of board seats held by minority women, the report said, at 6%, but the lowest percentage of board seats held by minority men, at 9.4%.

Outside of just consumer companies, though, progress is being made in diversifying boards. Deloitte and the Alliance for Board Diversity have been doing this report on board diversity since 2012, and the latest report notes that the number of companies with greater than 40% diversity has doubled since 2012.

“Overall, women and minorities have made more progress in board representation for the Fortune 500 between 2016 and 2018 than between 2012 and 2016,” the report reads. “This increased rate of change, while still slow, is encouraging.”

Washington called the importance of board diversity “quite clear” and noted that research has also shown improvements in business and performance indicators when the board of directors is diverse, especially data from European companies over the past ten years.

Having a diverse board of directors is not the same as having a diverse executive team, though, nor is it an automatic pass to being a fully diverse and inclusive organization. And in some cases, it can be a shield to hide behind for companies with less executive diversity, Bitar notes.

“I think it’s really like smoke and mirrors with diversity,” Bitar said, noting the difference between being on the board and actually running the company. “I think it’s much more difficult for it to be your day-to-day person that you’re taking in versus someone who’s on your board. It’s not like a full-time job for them and it’s easy to invite people to be on your board, but someone who’s actually going to run your company, the way you vet them and the way you’re going to pay them and the way you source them and all that — it’s very different. You don’t really need to be an organization who truly cares about diversity to have a diverse board.”

Will beauty brands ‘Pull Up for Change’?

Gender diversity isn’t the only challenge retailers face. The beauty sector Pull Up for Change challenge, calling on companies to release information on how many Black executives and employees they have.

Aurora James, founder and creative director of accessories brand Brother Vellies, called on retailers to take the 15% Pledge, vowing to increase the percentage of Black-owned brands sold in stores to 15%. Sephora was the first company to take the pledge, which Sephora Executive Vice President and Global Chief Merchandising Officer Artemis Patrick cited as an extension of the company’s diversity, equity and inclusion values.

“Early last year, Sephora announced a renewed commitment to this work with the launch of the ‘We Belong to Something Beautiful’ campaign — an external articulation of our values and a promise to continue building a beauty community to which everyone feels they belong,” Patrick said in an email. “Since then, we’ve taken several actions to make our mission a reality; from Sephora’s commitment to the 15% Pledge — through which we’re vowing to increase representation of Black-owned beauty brands at Sephora — to our first-of-its kind national study on racial bias in retail, we are dedicated to doing the necessary work to make the Sephora experience more welcoming and inclusive to all.”

The Pull Up for Change and 15% Pledge movements, combined with protests against systemic racism in the U.S., have held companies accountable to their commitments to racial equality in several different ways. DTC beauty brand Glossier promised $500,000 in grants to Black-owned beauty brands, as well as advisory support, and announced the winners of that money in early September.

Consumers have long pushed for greater inclusion in the cosmetics space to better serve previously ignored groups, including people of color. This year consumers sounded the alarm over skin-lightening products sold at many beauty companies, including L’Oréal and Estée Lauder, leading to internal reviews of those products. Estée Lauder’s commitment to evaluate such skin-lightening products followed an employee letter calling for the removal of Ronald Lauder from the board earlier in the year over his support of President Donald Trump. Lauder is still with the company.

One third of beauty retailers did not comment, or respond to requests for comment, on employee diversity statistics

Top retailers’ responses to requests for information about diversity at different levels of the company
Retailer % people of color % women
Nami Sumida/Retail Dive

Retail Dive requested employee diversity statistics from 15 beauty brands and retailers. Five of the companies contacted either provided no comment or did not respond to multiple requests for comment on the representation of women and people of color at the board, executive and employee levels. Others did not share specific statistics but did provide company statements on the importance of racial diversity.

Diversity efforts for beauty companies can be fraught, and the general term can hide specific challenges. Focusing too narrowly on increasing the percentage of women in certain roles, for example, risks overlooking how many women of color a company employs. While the percentage of women at organizations is critically important, especially in areas like beauty that are aimed at a majority female customer, diversity cuts across more identities than gender.

That level of detail in approaching diversity is still a work in progress, Washington said.

“If you’re just focusing on your gender numbers, and in many cases White women only, you’re missing the whole point and you’re missing the opportunity to think about intersectionality,” Washington said. “And honestly, the conversation around diversity, equity and inclusion has not reached the point where we are able to talk about intersectionality in the meaningful way that we should. Women of color, LGBTQ+ employees and all different types of diversity are important for the success of these DEI efforts.”

Erin Schmidt, Beauty Industry analyst at Coresight Research, said that calls for executive transparency are shaping up to have a meaningful impact on the beauty space. Schmidt likened it to the clean beauty movement several years ago, which was also the result of consumer demands for transparency.

“‘Clean companies’ with transparent corporate structures and diversity standards, Board of Directors diversity policies, and company-wide diversity standard operating procedures will become the new industry normal, just as clean beauty has become the new normal,” Schmidt said in an email to Retail Dive.

As major players in the space figure out how to go deeper on executive diversity, the movements toward racial inclusivity and gender fluidity in beauty, among others, are playing out through product launches and the debut of DTC brands to cater to specific needs.

“There have been lots of entrepreneurs that have taken advantage of going deep, whether it’s hair products for African Americans or makeup for Latinas or for Asian Americans,” Arias said. “There’s been a tremendous amount of great work and businesses that have been formed around catering to those communities. And I think that’s put a lot of pressure on those retailers to kind of match up with those trends.”

It’s also made it clear to legacy retailers that they’re missing out on new audiences, said Michelle Ngome, marketing strategist at Line 25 Consulting. She highlighted Rihanna’s Fenty Beauty and Kylie Jenner’s Kylie Cosmetics, in particular, which she thinks were successful because they were able to bring in different race and age demographics than traditional retailers, partially because as founders they embodied underrepresented groups themselves.

The number of brands launching that cater to a specific community has brought those communities to the attention of larger companies, leading to more focus on product inclusivity and in some cases to acquisitions, for example, Coty’s come under question in recent months.) Not all acquisitions are seen as positive by consumers. The acquisition of Black-founded brands like Carol’s Daughter, picked up by L’Oréal in 2014, and Sundial Brands (the owner of Shea Moisture), acquired by Unilever in 2017, have not always sat well with the brands’ Black consumers.

“There were a lot of issues with that in our community,” Ngome said of the acquisitions, highlighting that ownership passes out of the hands of Black founders in cases like these. “Although we’re carving out space for us, there have definitely been issues when great companies that have been supported by Black women eventually sell to a bigger company led by a White man, and it’s disheartening.”

Finding a way to appeal to those audiences is a must for traditional beauty brands, though. And the most assured way of making decisions that benefit underrepresented groups is to have them on the executive team, Bitar said, in positions that are guiding the company’s strategic vision and product development.

“It’s that executive level that is determining what they’re going to invest in,” Bitar said, warning that traditional players in the beauty space will ultimately lose out to DTC brands if they don’t improve their executive team’s diversity. “Unless they’re going to continue to buy these smaller companies that do target these other audiences and allow them to operate semi-independently and go after that — I guess you get away with that. But again, if your group is all older, Caucasian males, I’m not sure you’d have the visibility of who these brands even are.”

If it’s not already now, it will become critical for beauty retailers to understand underrepresented groups and the importance of the brands that cater to them in the coming years, especially consumers of color. A recent report by Karen Dahms, a research director for Diversity Best Practices, highlighted that the U.S. will become minority White by 2045, and that in the demographic 18 and younger, it already has.

A large focus for these companies should logically, then, be on succession planning, Dahms noted. Treated correctly, the next 10 years could bring great opportunity for the beauty space.

“A lot of people that are in those senior roles that are predominantly White will be approaching retirement age and looking to off-ramp,” Dahms said. “This really creates an opportunity for organizations to look more closely at their demographic profile, and to create pathways for these underrepresented groups to make their way into more senior positions.”

Come 2021, L’Oréal may end up being the first to define what the next wave of beauty CEOs looks like at legacy brands. That, in turn, will impact the makeup of the executive team — and, without enough diverse representation, it might determine where beauty innovators of the future turn for jobs.

“If they don’t see these changes happening in their organization, they will go work someplace else,” Dahms said of the young, diverse working population. “We’re past the point in time where people stay at a job for 20 years for the gold watch.”

The question now is whether beauty retailers know that.

Methodology

Retail Dive’s analysis in this series focuses on representation gaps for people of color and women and is rooted in available data.

Throughout this package, when discussing multiple underrepresented racial groups, including Black, Hispanic, Asian, American Indian and Hawaiian employees, as well as employees of two or more races, as one group, we use the terms people or employees of color. We also often use the term underrepresented groups to refer to not just people of color, but other minority groups in the workplace, including women. However, not all organizations and sources use the above terms. As a result, some quotes and information provided by sources or companies may use different terms in this piece.

In tracking the leadership teams and boards of directors for L’Oréal, Estée Lauder and Ulta from 2010 to 2019, Retail Dive used annual reports and SEC filings.

For Ulta, Retail Dive defined the executive team as its “Executive Officers of the Registrant.” For L’Oréal, the executive team was defined by the “Executive Committee” listed in its annual reports. For Estée Lauder, the executive team was defined by the “Executive Officers” listed in 10-Ks.

Since Sephora is owned by LVMH and does not report a full executive team in annual filings, we tracked only Sephora’s CEO of the Americas and CEO over the time period, using annual filings and company press releases. We do not show LVMH’s board of directors since the company is responsible for much more than just beauty.

In cases where an outgoing executive or board member was listed at the companies, we included it in our count.

For the current year of executive and board leadership, Retail Dive used those currently listed on company websites. We determined the gender of executives through the honorifics and pronouns the company used to refer to that employee, either in press releases, company bios or SEC filings.

In our analysis of individual companies’ employee diversity statistics, we asked all retailers included for the same six statistics: the percent of people of color and the percent of women at the leadership, board and employee levels respectively. Terminology and level of detail vary depending on the retailer’s response, and occasionally based on what country the retailer is headquartered in and local laws governing data collection.

We chose the retailer responses to include in this piece based on which retailers analyst firms identified as some of the top in the beauty space, and also which retailers and brands Retail Dive found relevant.