How to Move Beyond Quotas and Box Checking to Move Toward Corporate Board Diversity
About Corporate Board Diversity
Diverse boards are more financially profitable, according to a number of studies. This has led to a convergence of forces that are pushing companies to adopt more diverse boards. These include protests and activism by people of color and women as well as pressure from investors and shareholders and the perception of companies with diverse boards as “good” for society.
Despite all that momentum, many companies do not have diverse boards. Nasdaq reported that, in the year 2000, 75 percent of companies listed on their exchange would not have met the stock market’s seemingly basic diversity requirements. Black, Latinx, Asian, and other minorities are underrepresented despite their large numbers in the US population.
Quotas offer one option. They’ll require companies to reveal the diversity of their boards using the same template, and to have at least two directors who self-identify themselves as women or from minority groups that are not represented, or justify why they aren’t. The use of quotas to promote diversity isn’t the best solution. It can raise legal issues and reduce the benefits of having more voices on the board.
It’s time to move beyond boxes-checking, quotas, and more to a deliberate purposeful, deliberate approach to governance. It’s about focusing less the proportion of minorities and women are in the room and more on how those voices can be used to boost the company’s performance. This requires a change in culture that includes creating an atmosphere where it is safe to think differently and engage in challenging discussions.
