Corporate Board Diversity

Companies understand that diversity on boards results in better decision-making and increased stakeholder involvement. It also fosters an environment that is more innovative. However, many struggle to make diversity a reality in their boardrooms. A multitude of forces have been pushing boards towards greater diversity: activism from women and other people of color, such as the Black Lives Matter Movement; pressure from investors and other market participants; and state legislation.

However, despite these improvements the composition of most boards is still lagging with the overall population in the United States. According to the latest Spencer Stuart study, white people hold 84 percent of the Fortune 500 board seats. The number of women, ethnic/racial minority members, and minorities on the board has not increased over the last five years.

As a result, a few institutions are beginning to step up the pressure on boards to support diversity and adopt policies that support it. For example, CalPERS, the $330 billion pension fund for California public employees has sent letters to 504 companies in the Russell 3000 index with low levels of gender diversity on their boards.

To increase diversity on the boardroom, companies need to expand their search beyond the traditional network of executive peers. They should also hire consultants to help them find new candidates. They must also eliminate selection criteria and processes that have hindered diversity in the boardroom and adopt new best practices. They should also look into formal onboarding programs to help different directors become familiar to the board’s culture, and corporate board diversity workings.