Companies are aware that diversity on boards leads to better decision-making and increased stakeholder engagement. It also helps create a more innovative environment. However, many struggle to make diversity a reality in their boardrooms. A number of forces have been pushing boards toward greater diversity: activism from women and people of color, like the Black Lives Matter Movement; pressure from investors and other market participants; and legislation.
However, despite these improvements, the composition of boards still lags behind the overall population of the United States. According to the latest Spencer Stuart study, white people hold 84 percent of Fortune 500 board seats. Moreover, the number of women and ethnic/racial minorities on the board has not grown significantly in the past five years.
In the wake of this, some institutions are beginning to intensify the pressure on boards www.board.international/the-top-virtual-data-rooms/ to support diversity and adopt policies to support it. For instance, CalPERS, the $330 billion pension fund for California public employees, has sent letters to 504 businesses in the Russell 3000 index with low levels of gender diversity on their boards.
To increase diversity in the boardroom companies must broaden their search beyond the traditional network of executive peers. They should also employ consultants to identify new candidates. They must also eliminate the selection criteria and procedures that have impeded diversity on the board and adopt new best practices. In addition, they should consider creating formal onboarding programs to enable diverse directors to become at ease with the board’s operations and culture.