About Corporate Board Diversity
Diverse boards are more financially successful According to a range of studies. This has resulted in an array of forces https://board.international/how-to-encouraging-an-effective-advisory-board/ that are pushing companies towards 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 that companies with diverse boards as “good” for society.
Despite all this progress however, a majority of companies do not have very diverse boards. In the past year, Nasdaq found that 75 percent of the companies listed on its exchange would not have fulfilled the stock market’s easy diversity requirements. Black, Latinx, Asian and other minorities are underrepresented despite their substantial proportions in the US population.
Quotas can be a solution. They would oblige companies to publish the diversity of their boards based on an approved template, and include at least two directors who self-identify themselves as female or from minority groups that are underrepresented, or give reasons for why they don’t. Utilizing quotas for diversity is not the best solution. It could raise legal concerns and dilute the benefits of having more voices on the board.
It’s time to move beyond quotas, box-checking, and more, to a thoughtful, purposeful approach in governance. It’s about focusing less on how many women and minorities are seated at the table and more on how those voices can be used to improve the company’s performance. This requires a shift in the culture, which includes creating an atmosphere where it is safe to take a different perspective and have challenging conversations.
