Corporate Board Diversity

Corporate Board Diversity

Companies understand that diverse boards help make better decisions and improve stakeholder engagement and foster more innovative environments. Yet, many are struggling to ensure that diversity is a reality in their boardrooms. A variety of forces have been pushing boards toward greater diversity: activism and protests 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 gains the composition of boards is still not up to par with the overall population of the United States. According to the latest Spencer Stuart study, white people hold 84 per cent of the Fortune 500 board seats. The number of women, ethnic/racial minority members, and minorities on the board has not risen in the last five years.

Some institutions are stepping up the pressure they apply to boards to adopt policies that encourage 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 encourage boardroom diversity, companies need to expand their search areas beyond the traditional networks of executive peers and also employ consultants from outside to help find new candidates. They must also eliminate selection criteria and processes which have impeded diversity on the board and adopt new best practices. They should also look into formal onboarding programs to assist diverse directors become more comfortable to the culture of the board and its workings.

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