The Impact of Board Diversity

There is a growing awareness among corporate leaders and investors that diverse boards can help companies better serve consumers, customers employees, communities and employees. Additionally recent debates on gender and racial equality in the workplace have led to state-level legislation to promote and encourage diversity in corporate boardrooms.

Numerous studies have linked higher levels of board diversity with superior company performance. A 2015 McKinsey study found that companies in the top quarters of diversification of race were 33 percent more likely than those in the bottom quarter to outperform them. Another study from 2016 found that women on boards are associated to lower volatility in earnings and a better stock liquidity as well as improved investor perceptions about firm value.

These findings suggest that cognitive diversity enhances board decision-making and enhances the ability of boards to effectively mentor and supervise management. The variety of demographic characteristics, such as age and race, and gender, also helps create an inclusive and respectful culture in the boardroom. This encourages healthy debates and open exchanges of ideas.

Another key aspect is functional diversity that refers to the diversity of knowledge and experience board members bring to the table. The variety of functional attributes such as tenure and educational background improves the board’s ability to understand the cognitive resources of the group members (such as their talents and knowledge) and can lead to better decisions by the board.

Boards should be proactive about diversity and employ a variety of methods to search for new members. But the most important factor is to ensure that all directors buy into the importance of considering diverse viewpoints in boardroom discussions. If everyone is aware of the reasons and how this will benefit the company board members will naturally encourage the exchange of different perspectives.

Etiquetas: Sin etiquetas

Add a Comment

Your email address will not be published. Required fields are marked *