Corporate Board Diversity
Companies are aware that diverse boards improve decision-making and improve stakeholder engagement and help create more innovative environments. However, many struggle to ensure that diversity is a reality in their boardrooms. A number of forces have been pushing boards toward greater diversity: activism from women and other people of color, like the Black Lives Matter Movement; pressure from investors and other market participants; and state legislation.
But despite these gains the composition of most boards is still below the total population in the United States. According to a recent study by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. The number of women, ethnic/racial minorities members, and minorities on the board have not increased in the last five years.
As a consequence, certain institutions are beginning to increase the pressure on boards to support diversity and to adopt policies that promote it. For example, CalPERS, the $330 billion pension fund for California public employees has sent letters to 504 companies on the Russell 3000 index with low levels of gender diversity on their boards.
To increase diversity in the boardroom companies must expand their search beyond the traditional network of executive peers. They should also hire consultants to find new applicants. They should also eliminate selection criteria and processes that have hindered diversity on the board in the past, and establish new best practices. They should also consider formal onboarding programs to help different directors become more comfortable to the culture of the board and its workings.
www.board.international/how-to-increase-corporate-board-diversity/