Corporate Board Diversity

Companies understand that diverse boards enhance decision-making and improve stakeholder engagement and create more creative environments. However, many struggle to achieve diversity in their boardrooms. A variety of forces have been pushing boards towards greater diversity: activism and protests by women and people of color, like the Black Lives Matter movement; pressure from shareholders and other market players; and state legislation.

But despite these improvements the composition of most boards is still below the total population of the United States. In fact, according to a recent study conducted by Spencer Stuart, white individuals still hold 84 percent of Fortune 500’s board seats. The number of women, ethnic/racial minority members, and minorities on the board have not risen in the last five years.

In the wake of this, some institutions are beginning to increase the pressure on boards to increase diversity and adopt policies that support it. For instance, CalPERS, the $330 billion pension fund look at this now for California public employees, has sent letters to 504 businesses in the Russell 3000 index with low levels of gender diversity on their boards.

To encourage boardroom diversity, companies need to expand their search options beyond the traditional networks of executive peers and hire consultants outside of the company to find new candidates. They must also eliminate selection criteria and processes that have hindered board diversification in the past and create new best practices. They should also think about formal onboarding programs to help different directors become more comfortable with the board’s culture and workings.