Corporate Board Diversity
Companies recognize that diversity on boards contributes to more informed decision-making as well as increased stakeholder involvement. It also creates an environment that is more creative. Many companies struggle to make diversity in their boardrooms a reality. A confluence forces have been pushing boards toward greater diversity: activism by women and other people of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; and legislation.
However, despite these advances however, the composition of the majority of boards is still behind the overall population in the United States. In fact, according to a recent study conducted by Spencer Stuart, white individuals still hold 84 percent of Fortune 500’s board seats. Furthermore, the number of ethnic minorities and women on the board hasn’t increased significantly over the last five years.
Certain institutions are increasing the pressure they exert on boards to adopt policies that support diversity. For example, CalPERS, the $330 billion pension fund for California public employees, has sent letters to 504 companies in the Russell 3000 index with low levels of gender diversity on their boards.
To increase diversity on the board To encourage diversity in the boardroom, companies must expand their search areas beyond traditional networks of executive colleagues and recruit consultants from outside to help find new candidates. They should also eliminate paperless board meetings selection criteria and processes which have hindered diversification of the board and adopt new best practices. They should also consider formal onboarding programs that can help diverse directors become comfortable to the board’s culture and functioning.