About Corporate Board Diversity
Diverse boards are more financially successful According to a variety of studies. This has led to a fusion of forces pushing companies toward more discover here diverse boards: protests and activism by women and people of color pressure from shareholders and investors; and a perception that companies with diverse boards are “good” for society.
Yet, even with all the momentum, many companies don’t have diverse boards. Last year, Nasdaq found that 75 percent of the companies on its exchange wouldn’t have met the stock market’s arguably easy diversity standards. Black, Latinx, Asian, and other minorities aren’t represented despite their large proportions in the US population.
One solution is quotas which will require companies to report their diversity at the board level using a standard template, and have at least two directors who self-identify as female or as members of underrepresented minorities–or else provide reasons why they don’t. The use of quotas to promote diversity is not the best solution. It could cause legal issues and diminish the advantages of having more voices on the table.
Instead, it’s time to go beyond box-checking and quotas to take advantage of a more thoughtful, focused approach to governance. It’s about focusing less on how many minorities and women are seated at the table and more on how these voices can be leveraged to improve the performance of the business. This requires a shift in culture that includes creating an environment in which it is safe to have challenging conversations and to explore different perspectives.