The Diversity Myth: A Board Search Firm’s Perspective

02 May

A Board Search Firm Perspective: The Diversity Myth

When most companies and their boards think of diversity they are most often concerned about two things, GENDER & RACE. This is not completely off base but it is far from totally accurate. Much of what is published on diversity today is focused on the inclusion of women on corporate boards given the overall population is evenly split between men and women, but board representation is not. Several foreign governments have already mandated board diversity and even the state of California has passed a resolution for public companies directing the number of women that must be included on their boards.

Boards have traditionally been laggards on diversity. In fairness, one of the most important criteria for serving on a public company board is a significant level of senior executive experience…thus fewer diversity candidates. Eventually, government will most likely regulate all public companies towards more diversity.

There needs to be a new definition of diversity. Strategically, a board’s diversity should be a reflection of the company’s stakeholders. These stakeholder include owners/shareholders, employees, customers, suppliers and even communities served (more to come in a later posting). Are your company’s stakeholders faithfully represented through the makeup of your board?

Obviously a company serving the needs of a broad base of stakeholders can not have a board that represents all constituents, as well as serve the functional board requirements (finance, compensation, governance etc.) The key is to be aware of the need for diversity and have a board that is strategic and understands all the constituencies served by the company. Below is a link for more reading that will tell you how companies with diverse boards outperform those who are not as diverse.

A strong, diverse board will help a company:

1. Better understand customers to help focus the business
2. Faithfully represent and serve the company’s key stakeholders.
3. Manage risk. Different perspectives can uncover potential problems or weaknesses.

Below is a link to a comprehensive look at diversity.