Dispel the Myth of “FIT”: Improve Diversity on Your Board 9 min read Download A diverse, equitable and inclusive board culture contributes to the organisation’s success by positioning directors to advise the CEO and add value in evolving markets. Does your board measure up? Diversity in the boardroom encompasses all dimensions of the human experience, including education, life experience, gender, race, ethnicity, sexual orientation, geography, age and specific areas of knowledge and expertise (such as digital savviness and mergers and acquisitions). Compelling research asserts that a diverse board leads to improved performance and innovation. For example, one study found that boards with greater gender diversity — particularly those with at least three women members — are more likely to prioritise innovation and technology.[1] Equity and inclusion are also important attributes of board culture. Inclusion entails onboarding previously excluded parties and facilitating an open environment conducive to dialogue and feedback. Equity requires fairness, access and a commitment to breaking down barriers, both real and perceived, in order to achieve diversity and inclusion. Accordingly, the market is driving more attention to the topic of diversity, equity and inclusion. Institutional investors, led by BlackRock and State Street Corp., are sounding the bell not only for gender diversity but for racial diversity as well. Interestingly, Nasdaq recently asked the U.S. Securities and Exchange Commission to allow it to require listed companies to have at least one woman director and one director who self-identifies as an underrepresented group and to potentially delist companies failing to disclose board diversity information. If other exchanges were to follow suit, they would align with the recent changes Institutional Shareholder Services made to its proxy voting recommendations and with developments in certain countries around the world on the gender diversity front. Some boards have received the message. In the five months following May 2020, 130 Black directors have been appointed to Russell 3000 corporate boards, an increase of 239% over the previous five months.[2] Is your board doing enough to improve diversity? Have the chair and CEO agreed on the diversity goals given the company’s strategy, markets, digital maturity and circumstances? Is there a timeline for achieving those goals? Is progress toward adding diversity to the board and ensuring equity and inclusion monitored, and are you satisfied with that progress? Whatever the answers to those questions, below are six suggestions for making demonstrable progress in improving diversity in the boardroom. Download Topics Board Matters Internal Audit and Corporate Governance Digital Transformation Improve Diversity on Your Board Diversity in the boardroom encompasses all dimensions of the human experience, including education, life experience, gender, race, ethnicity, sexual orientation, geography, age and specific areas of knowledge and expertise. The market is driving more attention to the topic of diversity, equity and inclusion. Many institutional investors are sounding the bell not only for gender diversity but for racial diversity as well. Key Considerations Dispel the myth of “fit”; it’s time to get uncomfortable. “Fit” has long been part of the lexicon when evaluating board candidates. A candidate may have the desired technology expertise, but will he or she be an appropriate “fit” on a board replete with current and former CEOs? Granted, board candidates must possess broader business acumen rather than a specific domain of expertise. However, “fit” cannot be an excuse to sustain the status quo, nor should it be a cover for unconscious bias or other barriers to the participation of women and underrepresented groups in the boardroom. Expand your candidate horizons. It all starts with the board’s requirements when seeking candidates. If the screening criteria stipulate “a retired CEO who ran a large company at scale in the technology industry” or “a former CEO who managed through a crisis,” the available candidates will likely be mostly white males. However, with expanded search criteria, a broader pool of candidates will emerge. Improving diversity may require thinking out of the box and disrupting the “tried and true” processes used in the past. Be courageous. Boards exemplify their true character in how they pursue diversity, equity and inclusion goals. Don’t expect a single diverse board member to have a disproportionate impact, which could potentially set up this person for failure. Recognize the research that says meaningful change comes with three such members. In addition, intentionally create an environment in which different perspectives are welcomed and dialogue is encouraged in the boardroom. This is a tone that the board chair and committee chairs must own. Champion the benefits of diversity. Beyond the empirical evidence that shows diverse boards lead to better business performance, diverse boards also attract diversity to the organization itself. The long-standing strategic war for talent continues to grow more competitive as companies broaden the workforce. When top talent looks at the composition of the company’s board and executive team, what do they see? An outward view of the changing demographics of the company’s current and prospective customers adds perspective. Does the diversity currently present in the boardroom and C-suite position the company to develop and gain access to market opportunities over the next 3 to 5 years? If not, is the organization acting with intention to address this gap? Be an ally. We are all products of our experiences. In today’s era, directors can enrich their lives by increasing the diversity of their respective networks. Engaging in broadening conversations in different forums to listen and learn can help increase directors’ sensitivity to diversity as they position themselves to reduce unconscious bias when screening and selecting candidates. Make it a priority to include women and underrepresented groups when mentoring promising executives. For example, meeting the company’s top 20-25 leaders engages the board more actively in succession planning and evaluating executive bench strength and diversity. It also helps increase the board’s engagement in mentoring and sponsoring future women and minority directors. Achieve transparency with metrics and accountability. While this discussion is about the board, the relevance of diversity, equity and inclusion within the organization itself, including among key decision-makers, cannot be overstated. Bringing diversity into the boardroom, C-suite or customer-facing front lines begins with engagement, putting data in front of decision-makers, embracing that data, setting objectives and adopting a plan tailored to the business’s unique circumstances and driven with intention by every business leader. Dashboards should focus on the company’s progress toward recruiting a diverse workforce and fostering an inclusive and equitable workplace. Employee satisfaction with the company’s progress toward achieving diversity, equity and inclusion objectives should be tracked. Once objectives and expectations are set, results are best achieved through a transparent focus on measuring progress and linking compensation to performance. The board should not only expect progress annually but also look to its own role in setting the tone as well as consider the example set by the C-suite and other leaders. Want to learn more? Read the full article from our Board Perspectives: Risk Oversight newsletter series. Read More(PDF) View All Issues
