Corporate Board Diversity
Companies are aware that diversity on boards contributes to better decision-making and increased stakeholder involvement. It also creates an environment that is more innovative. However, many struggle to make diversity a reality in their boardrooms. A confluence of forces has been pushing boards toward greater diversity. These include protests and activism by women and people of color, such Data Room Software as the Black Lives Matter movement; pressure from shareholders and other market participants and legislation from the state.
But despite these gains the composition of most boards still lags behind the overall population of the United States. According to the latest Spencer Stuart study, white people still hold 84 percent of Fortune 500 board seats. The proportion of women, ethnic/racial minority members and minorities on the board have not increased in the last five years.
As a consequence, certain institutions are beginning to intensify the pressure on boards to increase diversity and adopt policies to support it. CalPERS is an investment fund worth $330 billion that represents California public employees, has sent letters to 504 companies included in the Russell 3000 Index with low levels of gender diversity on their boards.
To increase diversity on the board To encourage diversity in the boardroom, companies must expand their search pools beyond traditional networks of executive peers, and employ consultants from outside to help find new candidates. They should also eliminate selection criteria and processes that have blocked board diversification in the past, and establish new best practices. In addition, they should consider establishing formal onboarding programs that assist directors from diverse backgrounds to become acclimated to the board’s workings and culture.