Corporate Board Diversity

Corporate Board Diversity

Companies are aware that diverse boards can improve decision-making and improve stakeholder engagement and help create more innovative environments. Many companies are still struggling to https://board.international/how-to-increase-corporate-board-diversity/ make diversity in their boardrooms to be a reality. A confluence of forces has been pushing boards toward greater diversity. There have been 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.

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

Some institutions are now increasing the pressure they apply to boards to adopt policies that encourage diversity. For example, 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 on the board Companies must expand their search pools beyond traditional networks of executive colleagues and recruit consultants from outside to search for new candidates. They must also eliminate selection criteria and procedures that have hindered diversification of the board and adopt new best practices. Additionally, they should think about the creation of formal onboarding programs that enable diverse directors to become acclimated to the board’s workings and the culture.