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Corporate Board Diversity

Companies are aware that diverse boards enhance decision-making and enhance stakeholder involvement and can create more innovative workplaces. Many companies struggle to make diversity boardrooms to be a reality. A confluence forces have been pushing boards toward greater diversity. These include activism by women and other people of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; state legislation.

But, despite these gains however, the composition of the majority of boards remains with the overall population in the United States. In fact, according to a study conducted by Spencer Stuart, white individuals still hold 84 percent of Fortune 500’s board seats. The proportion of women, ethnic/racial minorities members and minorities on the board have not risen in the last five years.

As a result, some institutions are beginning to step up the pressure on boards to increase diversity and to adopt policies that encourage it. For instance, CalPERS, the $330 billion pension fund for California public employees, has sent letters to 504 companies that are part of the Russell 3000 index with low levels of gender diversity on their boards.

To promote diversity in the boardroom, companies need to diversify their search sources beyond traditional networks of executive peers and also employ consultants from outside to help find new candidates. They should also eliminate selection criteria and procedures that have impeded diversity on the board and adopt new best practices. They should also consider formal onboarding programs to assist diverse directors become familiar to the culture of the board and its functioning.