About Corporate Board Diversity
Diverse boards are more financially efficient, according to a number of studies. This has led to a convergence of forces which are pushing companies to adopt more diverse boards. This includes activism and protests from women and people of colour and pressure from investors as well as shareholders, and the perception of companies with diverse boards as “good” for society.
Yet, even with all the momentum, many companies still don’t have very diverse boards. Nasdaq reported that, last year, 75 percent of companies listed on their exchanges would not have met the stock markets’ arguably simple diversity requirements. In addition, the representation of Black, Latinx, and Asian individuals is disproportionately small, despite those groups comprising significant portions of the US population.
One option is quotas, which will require companies to report their diversity on the board using the same template and have at least two directors who self-identify as female or members of discover here underrepresented minorities–or else justify why they don’t. Utilizing quotas to ensure diversity is not the best solution. It can raise legal issues and reduce the benefits of having more voices at the table.
It’s the time to move beyond quotas, box-checking, and other nonsense to a more thoughtful and deliberate approach to governance. This means focusing less on the proportion of minorities and women are in the room and more on how these voices can be leveraged to improve the company’s performance. This requires a change in culture that involves creating an environment that is safe to have provocative conversations and consider different perspectives.
