Corporate Board Diversity

Companies recognize that diversity on boards results in more effective decision-making and greater stakeholder engagement. It also fosters an environment that is more creative. Many companies struggle to make diversity in their boardrooms an actual reality. A swarm of forces have been pushing boards towards greater diversity. These include protests and activism by women and people of color, including the Black Lives Matter movement; pressure from shareholders and other market participants and state legislation.

But despite these improvements the composition of boards is still below the overall population of United States. According to the latest Spencer Stuart study, white people still hold 84 percent of Fortune 500 board seats. The proportion of women, ethnic/racial minorities members, and minorities on the board have not risen in the last five years.

Certain institutions are increasing the pressure they exert on boards to adopt policies that promote diversity. For example, CalPERS, the $330 billion pension fund for California public employees has sent letters to 504 companies that are part of the Russell 3000 index with low levels of gender diversity on their boards.

To increase diversity in the boardroom In order to encourage diversity on the board, companies should diversify their search sources beyond traditional networks of executive peers, and employ consultants from outside to help find new candidates. They should also remove the selection criteria and processes which have hindered board diversification and adopt new best practices. Additionally, they should think about developing formal onboarding programs to enable diverse directors to become board.international acclimated to the board’s workings and culture.