Corporate Board Diversity

Companies recognize that diversity on boards can lead to more informed decision-making as well as increased stakeholder engagement. It also fosters an environment that is more innovative. However, many companies are still struggling to achieve diversity in their boardrooms. A swarm of forces have been pushing boards toward greater diversity. There have been protests and activism by women and people of color, such as the Black Lives Matter movement; pressure from shareholders and other market participants and legislation from the state.

However, despite these improvements the composition of most boards is still behind the general population of the United States. In fact, according to a recent study conducted by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. Additionally, the proportion of women and ethnic/racial minorities on the board has www.board.international/how-to-increase-corporate-board-diversity/ not grown significantly over the last five years.

Some institutions are stepping up the pressure they apply to boards to adopt policies that encourage diversity. For instance, 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 diversify their search sources beyond traditional networks of executive peers and also employ consultants outside of the company to find new candidates. They should also remove the selection criteria and processes which have hindered diversification of the board and adopt new best practices. They should also think about creating formal onboarding programs to assist directors from diverse backgrounds to become acclimated to the board’s workings and culture.