June 17, 2020

Informed Diversity Discussions in the Boardroom

Diversifying board composition is a trending topic in the corporate governance community to facilitate building better boards of directors. This focus includes broadening board composition with diversity regarding gender, ethnic, and racial backgrounds. 

Importance of Diversity in the Boardroom

Often, CEOs are apt to create boards that think like they do with the thought of easy decision-making processes, congruent viewpoints, and similar guidance. However, a board built on this process has the inherent risk of insularity, especially when companies’ globalization is making business practices more complex. Mike Myatt, a leadership advisor to Fortune 500 CEOs and Boards, says, “looking good and being good are not always one and the same. There are also some CEOs who would view the perfect board as one that’s easy to manage – a board that’s compliant and one that doesn’t push back.” The limitations of a homogeneous board are not only a detriment to its members, but it also creates additional risk to the organization it serves.

The lack of a diverse board of directors often creates a pitfall in board decision making and what ACCA reports as a groupthink mentality. Groupthink is a psychological behavior that minimizes conflicts and reaching consensus decisions without critically evaluating alternative ideas in a cohesive group environment. ACCA states, “it is believed that a diverse board is able to make decisions more effectively by reducing the risk of groupthink, paying more attention to managing and controlling risks as well as having a better understanding of the company’s consumers.” Myatt also adds, “a board’s purpose is to govern not comply. A good board listens, contributes, challenges, and when necessary pushes back.” Diverse boards simply offer a depth and breadth of insights that non-diverse boards cannot provide to their organizations.

Directors cannot ignore the crucial role diversity plays in governance, particularly in the boardroom, to remain relevant in an increasingly competitive world. Companies that fail to dip into the ever-deepening talent pool of diverse, well-educated, and ambitious individuals risk hindering value creation, compromising sustainability, and undermining their long-term competitiveness. Although there are some challenges associated with having a diverse board, many of these may be viewed as temporary and will be outweighed by the overall benefits  of having a vibrant melting pot of different perspectives around the boardroom table.

Areas of Conversation for a More Diverse Board

The following topics are conversation starters or topics to provoke thought surrounding how your board can be more diverse and inclusive. These conversations are important to be having continually, throughout your organization, to ensure that you are creating the diversity your organization, patrons, and employees deserve. 

Consider Term and Age Limits

Term limits for your board of directors drive refreshment and a steady rate of turnover on your board. The turnover created by term limits allows the board to continually assess its needs and increase the opportunities to bring in more diversity. 

Age diversity doesn’t garner the same amount of attention that gender and ethnicity do, but it is also a vital part of building a comprehensive, diverse board composition. Considering candidates outside the typical age bracket of previous board members can bring in fresh perspectives with a younger generation of directors

Search for Skills, Not Titles

As you consider your organization’s needs, pay attention to the skillsets that will push you forward strategically. Focus on those skillsets when you are recruiting your next member. By focusing on skills over titles, boards can become better engaged with their strategy. Looking beyond retired CEOs for the needed expertise forces the board to go beyond their comfort zone and find diverse candidates who could be an even better fit for the organization’s strategic objectives. Eliminating the focus on titles opens the door to new directors who otherwise would be ignored. 

A Champion for the Cause

Does your organization have someone on that board that is making diversity a high priority? The most progress is made in organizations with a champion in a leadership position — the CEO, chairman, or another board member — who keeps diversity on top of mind. It can be easy to let other immediate concerns take precedence over the fight for diversity. When someone in leadership makes it their goal to ensure the organization’s diversity is always a topic of conversation, that is when you see real change. 

Diversity Across the Organization

Committing to diversity in your organization has to extend beyond the board room. Diversity should be represented in every area of your business. While the board is making guiding decisions for the entire organization, diversity from the ground up needs to be considered. It isn’t enough to build a board that checks all the right boxes; the organization as a whole should also portray diversity. 

New-to-Board Directors

Your board is likely comprised of mostly, if not only, people who have participated on a board of directors in the past. Previous director experience is beneficial to a board composition because it can eliminate much of the learning curve and allows for fast onboarding. However, the more boards reach beyond its sphere of current board members, the more opportunities there are to consider diversity. A candidate without prior board experience may require a lengthier onboarding process, but they also bring a fresh perspective and new ideas to your boardroom conversations. 

Forward Thinking 

Rather than focusing on your board’s current goals, objectives, or challenges, consider how you can build a better board for your company’s future growth. Not just what you need today, but what the board may require in five years to support the higher objectives. This opens up opportunities to bring in different backgrounds and identify people that will impact the future growth of the board. This future-based focus opens the mind to more diverse candidates. 

Empower a Diverse Board with the Best Board Portal

Govenda is the board portal solution that perfectly blends security, functionality, user experience, and affordability. Fast, intuitive, and flexible, Govenda gives companies the control they require and support when they need it. Designed with input from corporate secretaries, administrators, and board members to enhance board engagement, effectiveness, and governance, Govenda is used by companies worldwide. Start a conversation today!

Tag(s): Diversity

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