Corporate Board Diversity
Companies know that diversity in boards leads to more effective decision-making and greater stakeholder engagement. It also helps create a more innovative environment. Many companies still struggle to make diversity boardrooms a reality. A swarm of forces has been pushing boards towards greater diversity. There have been protests and activism by women and people of color, such as the Black Lives Matter movement; pressure from shareholders and other market participants; and legislation from the state.
However, despite these advances, the makeup of most boards is still behind the overall population of the United States. In fact, according to a study conducted by Spencer Stuart, white individuals still hold 84 percent of Fortune 500’s board seats. The number of women, ethnic/racial minorities members and minorities on the board has not risen in the last five years.
Some institutions are now increasing the pressure they place on boards to adopt policies that promote diversity. For instance, CalPERS, the $330 billion pension fund for California public employees has sent letters to 504 businesses in the Russell 3000 index with low levels of gender diversity on their boards.
To promote diversity in the boardroom, companies need to diversify their search sources beyond traditional networks of executive colleagues and recruit outside consultants to find new candidates. They should also eliminate selection criteria and processes that have hindered board diversification in the past and create new best practices. Finally, they should consider establishing formal onboarding programs that assist directors from diverse backgrounds to become acclimated to the board’s workings and culture.
