About Corporate Board Diversity
A number of studies have concluded that boards with diverse representation have a better financial performance. This has resulted in an array of forces that are pushing companies to adopt more diverse boards. This includes protests and activism from women and people of colour and pressure from investors as well as shareholders and the perception that companies with diverse boards as “good” for society.
Yet, even with all the momentum, many companies do not have diverse boards. In the year 2000, Nasdaq found that 75 percent of the companies listed on its exchange would not have fulfilled the stock market’s easy diversity requirements. The proportion of Black, Latinx, and Asian individuals is still small, despite those groups accounting for significant portions of the US population.
One option is quotas, which will require companies to report their diversity levels on the board using the same template and have at minimum two directors who self-identify as female or as minority members, or provide reasons why they don’t. Utilizing quotas for diversity isn’t the best solution. It could cause legal issues and diminish the advantages https://board.international/how-to-increase-corporate-board-diversity/ of having more voices at the table.
It’s time to shift from boxes-checking, quotas, and other nonsense to a more thoughtful, purposeful approach in governance. It’s about focusing less how many minorities and women are seated at the table and more on how those voices can be leveraged to improve the company’s performance. This requires a cultural shift that creates an environment that is safe to think differently and have challenging conversations.