Corporate Board Diversity

Companies are aware that diversity on boards results in better decision-making and increased stakeholder engagement. It also helps create a more innovative environment. Yet, many are struggling to achieve diversity in their boardrooms. A variety of forces have been pushing boards towards greater diversity. There have been protests and activism by women https://board.international/ and people of color, like the Black Lives Matter movement; pressure from shareholders and other market participants and legislation from the state.

However, despite these advances, the composition of boards is still below the total population in the United States. In fact, according to a recent study conducted by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. Furthermore, the number of women and ethnic/racial minorities on the board has not increased significantly in the past five years.

Some institutions are now increasing the pressure they exert on boards to adopt policies that encourage diversity. For instance, CalPERS, the $330 billion pension fund for California public employees has sent letters to 504 businesses in 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 find new applicants. They should also eliminate selection criteria and processes that have hindered board diversification and adopt new best practices. In addition, they should consider establishing formal onboarding programs that assist directors from diverse backgrounds to become familiar with the board’s processes and culture.