Corporate Board Diversity
Companies know that diverse boards help make better decisions, increase stakeholder engagement, and create more creative environments. Many companies are still struggling to make diversity in their boardrooms into a reality. A variety of forces have been pushing boards toward greater diversity. These include protests and activism by women and people of color, such as the Black Lives Matter movement; pressure from shareholders and other market participants; and legislation from the state.
However, despite these improvements however, the composition of the majority of boards remains behind the overall population of the United States. According to a recent Spencer Stuart study, white people still hold 84 per cent of the Fortune 500 board seats. Moreover, the number of women and ethnic/racial minorities on board has not increased substantially over the past five years.
Some institutions are now increasing the pressure they apply to 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 on 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 hire consultants to help them find new candidates. They should also eliminate selection criteria and processes that have hindered diversity in the boardroom and adopt new best practices. In addition, they should consider establishing formal onboarding programs that enable diverse directors to become comfortable with the board’s work and culture.