Corporate Board Diversity
Companies understand that diverse boards improve decision-making and increase stakeholder engagement and help create more innovative environments. However, many companies are still struggling to make diversity a reality in their boardrooms. A confluence forces have been pushing boards towards greater diversity. These include activism by women and other people of color, like the Black Lives Matter Movement; pressure from investors and other market participants; state legislation.
However, despite these gains the composition of most boards is still behind the overall population of the United States. According to an upcoming Spencer Stuart study, white people hold 84 per cent of the Fortune 500 board seats. Additionally, the proportion of women and ethnic/racial minorities on the board has not grown significantly over the last five years.
Some institutions are now increasing the pressure they apply to boards to adopt policies that promote diversity. CalPERS, a $330 billion pension fund that represents California public employees, 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 diversify their search sources beyond the traditional networks of executive peers and hire outside consultants to find new candidates. They must also eliminate selection criteria and processes which have hindered diversification of the board in the past and create new best practices. They should also think about formal onboarding programs to help different directors become more comfortable to the culture of the board and its functioning.
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