Corporate Board Diversity
Companies are aware that diversity on boards can lead to better decision-making and increased stakeholder engagement. It also helps create an environment that is more creative. Many companies struggle to make diversity boardrooms a reality. A variety of forces have been pushing boards towards greater diversity: activism by women and other people of color, such as Data Room Providers the Black Lives Matter Movement; pressure from investors and other market participants; and legislation.
However, despite these improvements, the makeup of most boards continues to lag behind the overall population of the United States. According to a study conducted by Spencer Stuart, white individuals still hold 84 percent of Fortune 500’s board seats. The number of women, ethnic/racial minorities members, and minorities on the board has not increased over the last five years.
Some institutions are stepping up the pressure they exert on boards to adopt policies that promote diversity. CalPERS, an account worth $330 billion that represents California public employees, sent letters to 504 companies included in the Russell 3000 Index with low levels of gender diversity on their boards.
To increase diversity in the boardroom To encourage diversity in the boardroom, companies must expand their search areas beyond the traditional networks of executive peers, and employ consultants outside of the company to find new candidates. They should also eliminate selection criteria and processes which have hindered diversification of the board and adopt new best practices. They should also think about formal onboarding programs to help different directors get acclimated to the culture of the board and its workings.