Corporate Board Diversity
A number of studies have concluded that boards with diverse representation perform better financially. This has created a fusion of forces that are pushing companies to more diverse boards: activism and protests by women and people of color as well as pressure from shareholders and investors; and a perception that companies with diverse boards are “good” for society.
Despite all this progress, a lot of companies don’t have boards with a wide range of diversity. In the past year, Nasdaq found that 75 percent of the companies on its exchange could not have fulfilled the stock market’s easy diversity requirements. Black, Latinx, Asian, and other minorities are not represented despite their substantial numbers in the US population.
Quotas are one solution. They will require companies to reveal the diversity of their board members using an approved template, and include at least 2 directors who self-identify as women or members of underrepresented minority groups–or give reasons for why they don’t. The use of quotas to promote diversity is not the best solution. It could cause legal concerns and dilute the benefits of having more voices on the table.
It’s the time to move beyond box-checking, quotas and other nonsense to a more thoughtful strategic approach to governance. It’s about focusing less the proportion of minorities and women are seated at the table and more on how their voices can be leveraged to improve the company’s performance. This requires a cultural shift that includes creating an environment that is safe to think differently and have difficult conversations.
www.board.international/how-to-transition-to-paperless-board-meetings/