Corporate Board Diversity
Companies recognize that diversity on boards results in improved decision-making and higher stakeholder involvement. It also creates a more innovative environment. But many still struggle to achieve diversity in their boardrooms. A confluence of forces has been pushing boards towards greater diversity. This includes protests and activism by women and people of color, including the Black Lives Matter movement; pressure from shareholders and other market participants; and legislation from the state.
But despite these gains the composition of most boards still lags behind the overall population of United States. According to an earlier Spencer Stuart study, white people hold 84 percent of the Fortune 500 board seats. The proportion of women, ethnic/racial minorities members https://board.international/how-data-room-providers-are-shaping-the-business-landscape/ and minorities on the board has not risen in the last five years.
As a consequence, certain institutions are beginning to intensify the pressure on boards to increase diversity and to adopt policies that support it. 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 increase diversity in the boardroom, companies must broaden their search beyond the traditional network of executive peers. They should also hire consultants to help them find new candidates. They should also remove the selection criteria and processes that have hindered board diversification and adopt new best practices. Finally, they should consider creating formal onboarding programs to aid diverse directors in becoming fully acclimated to the board’s workings and culture.