Corporate Board Diversity
Companies understand that diversity on boards results in more informed decision-making as well as increased stakeholder involvement. It also fosters an environment that is more innovative. Yet, many are struggling to achieve diversity in their boardrooms. A number of forces have been pushing boards toward greater diversity: activism from women and peoples of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; as well as state legislation.
However, despite these gains however, the composition of the majority of boards remains behind the overall population in the United States. According to a study conducted by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s 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.
Some institutions are now increasing the pressure they place 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 in the Russell 3000 index with low levels of gender diversity on their boards.
To promote diversity in the boardroom In order to encourage diversity on the board, companies should diversify their search sources beyond the traditional networks of executive peers, and employ outside consultants to find new candidates. They should also eliminate selection criteria and processes which have hindered diversity in the boardroom and adopt new best practices. They should also consider formal onboarding programs to help different directors become familiar to the board’s culture, and functioning.
