Corporate Board Diversity
Companies are aware that diverse boards can improve decision-making and increase stakeholder engagement and can create more innovative workplaces. Many companies are still struggling to make diversity in their boardrooms into a reality. A swarm of forces have been pushing boards towards greater diversity. These include protests and activism by women and people of color, like the Black Lives Matter movement; pressure from shareholders and other market players; and legislation from the state.
However, despite these advances however, the composition of many boards is still with the overall population in the United States. According to a recent study conducted by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. In addition, the percentage of ethnic minorities and women on the board hasn’t increased significantly over the last five years.
Some institutions are now increasing the pressure they apply to boards to adopt policies that promote diversity. CalPERS is an investment fund worth $330 billion which represents California public employees, recently sent letters to 504 businesses listed in the Russell 3000 Index with low levels of gender diversity on their board.
To increase diversity on the boardroom, companies need to expand their search beyond the traditional network of executive peers. They should also hire consultants to help them find new candidates. They also need to eliminate selection criteria and procedures that have hindered diversity on the board in the past, and establish new best practices. They should also consider formal onboarding programs to help different directors become more comfortable with the board’s culture and functioning.