Corporate Board Diversity
Companies know that diversity in boards leads to improved decision-making and higher stakeholder involvement. It also creates a more innovative environment. Many companies are still struggling to make diversity boardrooms an actual reality. A swarm of forces have been pushing boards towards greater diversity: activism and protests by women and people of color, such as the Black Lives Matter movement; pressure from shareholders and other market players; and legislation from the state.
However, despite these improvements, the composition of most boards is still not up to par with the total population in the United States. According to a study conducted by Spencer Stuart, white individuals still hold 84 percent of the Fortune 500’s board seats. Moreover, the number of ethnic minorities and women on board has not increased substantially over the past five years.
As a result, some institutions are beginning to step up the pressure www.board.international/how-to-increase-corporate-board-diversity/ on boards to encourage diversity and to adopt policies that support it. CalPERS, a $330 billion pension fund which represents California public employees, recently sent letters to 504 companies listed in the Russell 3000 Index with low levels of gender diversity on their boards.
To promote diversity in the boardroom Companies must expand their search pools beyond traditional networks of executive peers and hire outside consultants to find new candidates. Additionally, they must eliminate selection criteria and procedures that have hindered diversity on the board in the past and create new best practices. In addition, they should consider establishing formal onboarding programs that assist directors from diverse backgrounds to become familiar with the board’s processes and culture.