Why should we have more inclusive boards of directors?
July 15 2021
To answer this simply, because having a wide range of perspectives represented in the boardroom is critical to effective corporate governance. Moreover, diverse board members would bring different insights and crucial technical skills that could further improve the board’s functions. Additionally, diversity could help in having more creative approaches to conflict resolution and present different perspectives for possible solutions to corporate problems.
Notably, a director of Fortune 500 industrial products manufacturer stated that “if the board is not both diverse and inclusive, it lacks credibility with management, as well with investors, customers, employees, and other stakeholders.” The benefits of having a diverse board are particularly powerful when there is a critical mass of varied perspectives to support broad thinking. This means that a board is better off if the representation is as well-balanced.
Recently, in California, it was mandated that all locally headquartered publicly traded companies must have at least one female director by 2020. Such mandate, though new to the U.S., was already present elsewhere. For example, Norway, Spain, France, and Iceland have all required women’s board membership to be at least 40% of publicly listed companies’ boards.
A board needs to constantly challenge itself to keep pace with the changing dynamics a company faces more when they are TECH companies. This is best done through a robust dialogue of differing views if they are offered respectfully and listened to carefully. It is important to add that boards become more appreciative of having a broad perspective as they accumulate experience in dealing with it. Diversity and inclusion are not just the right thing to do but are important to the business agenda because boards are at their best when there is the diversity of culture, thinking, and perspective. For example, gender is only one of many attributes that contribute to the perspective that a director brings to the boardroom.
Stephanie J. Creary, Mary-Hunter (“Mae”) McDonnell, Sakshi Ghai, and Jared Scruggs, “When and Why Diversity Improves Your Board’s Performance”, Harvard Business Review: March 27, 2019.
BOARD DIRECTORS AND CHIEF EXECUTIVE OFFICERS, Different Is Better: Why Diversity Matters in the Boardroom, Russells, Reynolds Associates.
Jason WingardSenior Contributor, “Diverse Boards Propel Successful Companies — Three Strategies To Expand Pipelines”, Forbes: Feb 21, 2019.