Corporate Board Diversity

Companies know that diversity in boards can lead to improved decision-making and higher stakeholder involvement. It also creates a more innovative environment. Many companies struggle to make diversity boardrooms a reality. A variety of forces have been pushing boards towards more diversity: activism by women and other people of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; and legislation.

But despite these gains the composition of boards is still below the overall population of the United States. According to an upcoming Spencer Stuart study, white people still hold 84 percent of the Fortune 500 board seats. The proportion of women, ethnic/racial minorities members and minorities on the board has not increased over the last five years.

As a result, some institutions are beginning to step up the pressure on boards to support diversity and to adopt policies that promote it. CalPERS, a $330 billion pension fund which represents California public employees, has sent letters to 504 businesses listed in the Russell 3000 Index with low levels gender diversity on their board.

To promote diversity in the boardroom To encourage diversity in the boardroom, companies must expand their search options beyond traditional networks of executive peers and hire consultants outside of the company to find new candidates. They also need to eliminate selection criteria and procedures which have hindered diversification of the board in the past, and develop new best https://board.international/how-to-encouraging-an-effective-advisory-board/ practices. They should also look into formal onboarding programs to assist diverse directors become familiar with the board’s culture and workings.