Diversity in Boards
A lot has been written on the above topic and therefore, though on my mind, I kept deferring writing anything on this. However, a powerful quote by Kate Grussing, founder of Sapphire Partners – “The women think, ‘I don’t have everything the board’s looking for’ – well guess what, none of the men do either.”, got me thinking that this issue is still very relevant, and another note will only be helpful for the cause.
The issue of diversity was viewed more from a gender diversity perspective for a long while and yes, it is one of the most important facets of diversity which is still lacking from Board compositions after being talked about for more than a decade. Norway, Spain, France, Iceland have had laws requiring at least 40% women representation for public listed companies. Sometimes law enforcement can be the only option if something important is to be implemented and all else has failed, but wouldn’t it be more impactful if the boards decide to be diverse due to more compelling reasons – like better decision making, varied perspectives as also being reflective of the stakeholders – employees, customers, suppliers etc.
There have been many articles enumerating the benefits of a diverse boards. In 2018, McKinsey’s report stated: “Diverse companies are 33% more likely to have greater financial returns than their less-diverse industry peers.” Diverse boards help navigate complex and dynamic business environments more easily, such as we have seen during the pandemic. There were a host of unknown issues that Boards were grappling with and diverse perspectives and experiences were needed to navigate through the last year.
So, what does diversity mean – skills, expertise, experience, social, professional and much more
1. Skills and expertise – while at different times in the company’s growth phase specific insights of finance, technology, digital landscape, HR would be needed, overall, we still need a basket of skill sets at the Board level to draw upon.
2. Experience – a mix of tried and tested solutions as well as innovative ideas are needed to remain relevant and competitive.
3. Social – different values and beliefs provide a basis for looking at issues from different perspectives and it can also be reflective of the people we serve – this can come from diversity of gender, age, ethnicity, geography, sexual orientation and such other.
4. Professional – if the Board was made up of all ex-Chairs, CEOs and CFOs or all from the same industry, there would be good chance that the Board would miss out on new ideas or solutions and also not have a good healthy debate on issues, which is vital for balanced decision making.
In a nutshell, we need to expand the way we view diversity.
Boards will be remiss not to consider diversity as their key tool to become a good Board. The ideal Board candidate is one who has a good mix of experience, demographic and personal attributes. The nomination committees of Boards need to cast their net wide when looking for potential candidates.
Diversity should not be just “checking the box”, Boards need to value the breadth of perspectives rather than just inclusiveness of diverse traits.