The importance of having a professionally and socially diverse board cannot be overstated in today’s corporate world. However, despite the benefits of diversity in the C-suite, equal representation of gender, race, religion, age, sexual orientation and disability in corporate boardrooms is still a long way off. To make a case for why organizations should be more committed to increasing representation at board-level, in this blog, we will take a look at the benefits of a diverse board to understand what organizations stand to gain when they prioritize diversity in corporate governance.
The benefit of different perspectives
Different genders, ages, ethnicities, cultures, disabilities, sexualities can each bring different perspectives and multiple insights to the table from their different personal life experiences. A diverse board with executives capable of communicating diverse opinions will provide an ample opportunity for robust discussions, well-rounded decision-making and more innovative solutions.
Productive board discussions require diverse and varied perspectives that would disrupt the status quo, and it would be difficult to get different views if every board member shared similar social and professional backgrounds. Moreover, if all board directors were always on the same page, why would there be a need for a board at all?
More representation
When there is diversity at board-level, then it is very likely such diversity is going to be reflected throughout all departments in the organization. Essentially, companies with substantial representation of minority groups in top positions are more likely to hire and promote employees in these groups. This type of representation does not only attract top talent to the company, it also lends the idea of a diverse corporation which puts the corporations in a good light in the eyes of shareholders, investors, customers, regulators, the media and other entities.
Also, diversity in boardrooms, be it in gender, sexuality, ethnicity, etc., means a board of directors from diverse backgrounds who set the stage for tackling ideas from different angles and multiple perspectives. Such a company would be better informed with decision-making when it comes to handling issues that represent the diversity that exists within their workplaces and the societies they operate in.
Shareholders want it
Unsurprisingly, shareholders in many listed companies are demanding for more representation in senior level management including but not limited to diversity of gender, race, age and expertise. The 2017 Board Diversity Survey by Deloitte revealed that 95% of the respondents were in support of more diversity in the workforce.
The demand for more diversity in boardrooms by shareholders has been no doubt spurred by the fast-changing global economy which necessitates corporations to have as much representation as possible on their boards. Moreover, a board that lacks diversity would be less likely to accurately understand and therefore tackle the needs of their, most likely, diverse audiences. Diversity at board level will enable corporations to become more sensitive to those who live and work in the real world to some extent and that’s what shareholders want.
Companies with diverse boards perform better
Several studies have shown a correlation between business performance and diversity in corporate governance. Boards are better equipped to perform at their very best when professional, social and cultural diversity which promotes diversity of thought and perspectives are abundant on the board table. A 2015 report from McKinsey & Company, and a 2016 report from the Peterson Institute for International Economics both showed that companies with more diversity in corporate governance achieved better profits than others.
A more recent 2018 report from McKinsey & Company only further strengthens the need for diversity as the analysis demonstrated companies with gender, cultural and ethnic diversity in C-suite were 43% more likely to see better-than-average profits. Thus, a diverse board can give corporations a competitive edge in their respective industries that will help them improve performance and increase profits.
The benefits of having a socially and professionally diverse board are too valuable to ignore. In addition to the fact that diversity projects an impression of an inclusive company, the varied life and professional experience that those from different walks of life bring to a board are crucial to making decisions that represent every person that comes into contact with your organization.
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