Corporate Board Diversity
Companies know that diverse boards improve decision-making, increase stakeholder engagement, and how to encouraging an advisory board help create more innovative environments. But many still struggle to achieve diversity in their boardrooms. A swarm of forces has been pushing boards towards greater diversity: activism and protests by women and people of color, such as the Black Lives Matter movement; pressure from shareholders and other market players; and legislation from the state.
But despite these gains the composition of boards remains a bit behind the overall population of the United States. According to a recent study by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. The proportion of women, ethnic/racial minority members, and minorities on the board have not grown over the past five years.
As a result, a few institutions are beginning to intensify the pressure on boards to promote diversity and to adopt policies that encourage it. 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 To encourage diversity in the boardroom, companies must diversify their search sources beyond traditional networks of executive colleagues and recruit consultants from outside to help 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 look into formal onboarding programs to help diverse directors become familiar to the board’s culture and workings.