Corporate Board Diversity
Companies are aware that diverse boards can improve decision-making and enhance stakeholder involvement and can create more innovative workplaces. Many companies still struggle to make diversity in their boardrooms to be a reality. A multitude of forces have been pushing boards toward greater diversity: activism from women and other people of color, like the Black Lives Matter Movement; pressure from investors and other market participants; state legislation.
However, despite these advances, the composition of boards is still not up to par with the overall population of the United States. According to an upcoming Spencer Stuart study, white people still hold 84 percent of the Fortune 500 board seats. The proportion of women, ethnic/racial minorities members and minorities on the board have not increased in the last five years.
Certain institutions are increasing the pressure they exert on boards to adopt policies that promote diversity. CalPERS, an investment fund worth $330 billion which represents California public employees, has sent letters to 504 companies listed in the Russell 3000 Index with low levels of gender diversity on their boards.
To increase boardroom diversity, companies need to expand their search beyond the traditional network of executive peers. They should also seek out consultants to find new candidates. They also need to eliminate selection criteria and procedures which have hindered diversification of the board in the past and create new best practices. They should also consider formal onboarding programs that can help diverse directors become familiar to Data Room Providers the board’s culture, and functioning.