Corporate Board Diversity
Companies are aware that diversity on boards results in improved decision-making and higher stakeholder engagement. It also helps create an environment that is more innovative. However, many companies are still struggling to make diversity a reality in their boardrooms. A number of forces have been pushing boards toward greater diversity. These include activism by women and people of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; state legislation.
However, despite these advances, the makeup of most boards is still with the overall population in the United States. According to an earlier Spencer Stuart study, white people still hold 84 percent top virtual data rooms of the Fortune 500 board seats. The proportion of women, ethnic/racial minorities members, and minorities on the board have not risen in the last five years.
Some institutions are now increasing the pressure they put on boards to adopt policies that support 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 increase diversity in the boardroom companies must expand their search beyond the traditional network of executive peers. They should also seek out consultants to identify new candidates. They must also eliminate selection criteria and procedures that have hindered diversification of the board and adopt new best practices. In addition, they should consider creating formal onboarding programs to help diverse directors become fully at ease with the board’s operations and culture.