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As the cannabis industry scales, so does its need for experienced business veterans to steer companies towards the top. The demand has led to an influx of executives entering the space from other industries.
Most in the cannabis industry note that the move is a likely response to a nascent space. However, as recent analyses revealed, gender and diversity gaps persist at the top of cannabis companies.
Why Hire Executives From Outside Industries?
Numerous cannabis companies continue to lack the needed boardroom experience to bring a startup to a grander stage.
That skills gap led to the demand for outside industry talent in recent years. The trend continues today as more companies come online.
Nichole McIntyre, urban-gro Inc (NASDAQ: UGRO)'s vice president of human resources, told Benzinga that bringing in leadership from industries experiencing similar regulations is helpful as companies scale.
Luis Merchan, CEO of Flora Growth Corp (NASDAQ: FLGC), echoed similar sentiments.
"The industry is going through a period of transformation where operations, supply chain management, project management and financial discipline are becoming imperatives in the skill set of executives that lead cannabis companies," Merchan said.
Luke Zimmerman Esq, a cannabis industry attorney and instructor at Oaksterdam University, said outside leadership is a suitable decision for many companies. "If you want to be a multi-state operator or try to expand to other countries, it makes sense to hire someone who has the background and experience to help grow the business," he stated.
Zimmerman added that he believes the influx of outside leadership is spurred on by the innovative and exciting appeal of the industry.
He also noted that changing spaces is leading to transitions, such as shifts in tobacco use, decreasing alcohol consumption among younger demographics and an evolving pharma industry all playing a part.
"C-suite execs from these industries are paying attention to this and see the opportunities the cannabis industry is offering," Zimmerman said.
McIntyre warned incoming leaders who may underestimate the culture shift in the nascent space, notably its casual pace.
"Cannabis companies desire change and a new way of business operations which I believe originates from ongoing plant advocacy to overcome inaccurate public perceptions and misguided public policy," McIntyre stated.
Inclusion Continues To Lag In Cannabis
Some improvements have been made since the industry first began taking shape several years ago. However, various recent reports reveal that inclusivity could be improved in the cannabis industry, including the C-suite.
Marijuana Business Daily's Women and Minorities in the Cannabis Industry report said that racial and gender diversity lags across the market, as does data tracking. "Social equity initiatives and cannabis legalization are now intertwined, but there is still no magic bullet to improve the landscape," wrote Jenel Stelton-Holtmeier.
Two additional studies honed in on C-suite representation. "Gender Parity In The C-Suite," from the National Cannabis Industry Association and the Arcview Group noted a lack of inclusion at the top, letting the problem trickle down across the company.
In June, a report from business publication Insider reported that white males made up 70% of top executives at the industry's 14 leading companies. Black individuals made up just 7% of top-level leadership.
Most respondents felt more could be done to reach adequate levels of inclusivity in the space.
urban-gro's McIntyre agrees that more diversity is needed across cannabis but said that improvement is underway. "Many cannabis companies are beginning to focus their efforts on diversity, equity, and inclusion in their company culture, executive staff, and BODs," she said.
"There is still some work to be done with regards to diversity, in part because of the stigma around the industry," said Merchan, adding that Flora emphasizes its inclusivity, including a 50% diversity ratio in the C-suite.
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