Corporate Board Diversity
Companies are aware that diversity on boards contributes to improved decision-making and higher stakeholder engagement. It also creates an environment that is more innovative. Many companies still struggle to make diversity boardrooms to be a reality. A confluence of forces has been pushing boards toward greater diversity: activism and protests by women and people of color, like the Black Lives Matter movement; pressure from shareholders and other market players; and state legislation.
However, despite these gains the composition of most boards is still with the overall population in the United States. According to an earlier Spencer Stuart study, white people hold 84 percent of Fortune 500 board seats. The number of women, ethnic/racial minority members, and minorities on the board has not risen in the last five years.
Certain institutions are increasing the pressure they exert on boards https://board.international/how-to-increase-corporate-board-diversity/ to adopt policies that promote 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 promote diversity in the boardroom, companies need to expand their search options beyond traditional networks of executive peers and also employ outside consultants to find new candidates. They should also remove the selection criteria and procedures that have hindered board diversification and adopt new best practices. They should also look into formal onboarding programs to help different directors become familiar to the board’s culture, and functioning.
