Corporate Board Diversity

Companies understand that diverse boards can improve decision-making and improve stakeholder engagement and foster more innovative environments. Many companies struggle to make diversity boardrooms into a reality. A confluence of forces has been pushing boards towards greater diversity. These include protests and activism by women and people of www.board.international/how-to-encouraging-an-effective-advisory-board/ color, including the Black Lives Matter movement; pressure from shareholders and other market participants and state legislation.

But despite these improvements the composition of most boards still lags behind the total population in the United States. According to an upcoming Spencer Stuart study, white people still hold 84 per cent of Fortune 500 board seats. In addition, the percentage of minorities, ethnic or racial, women and other minorities on the board has not increased significantly over the last five years.

As a result, some institutions are beginning to increase the pressure on boards to support diversity and 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 on the boardroom, companies need to expand their search beyond the traditional network of executive peers. They should also engage consultants to find new applicants. Additionally, they must eliminate selection criteria and processes which have hindered diversification of the board in the past, and develop new best practices. They should also think about establishing formal onboarding programs that aid diverse directors in becoming fully at ease with the board’s operations and the culture.