The Impact of Board Diversity

There is an increasing awareness among corporate leaders and investors that diverse boards can help companies better serve consumers, customers, employees and communities. Recent debates regarding gender and race equality in the workplace has also prompted state-level laws to encourage and encourage diversity on corporate boards.

Numerous studies have proven that a diverse board is associated with superior company performance. These studies include an article from 2015 by McKinsey report that revealed companies that were in the top quarter of diversity of race were 33 percent more likely to outperform those in the bottom quartile and a 2016 study that found that women on boards are linked to lower earnings volatility, higher stock liquidity and higher investor perceptions of company value.

These results suggest that cognitive diversity improves board decision making and increases the board’s ability to effectively mentor and supervise management. Moreover, the diversity of demographic characteristics, such as gender, race, age and can contribute to a more inclusive and respectful environment in the boardroom, which promotes healthy debate and an open discussion of ideas.

Functional diversity is a crucial aspect. This refers to the different types of education and experience that are brought to the board by board members. Being able to have diverse functional characteristics, like tenure and education, enhances the abilities of the board to recognize the cognitive resources of members (like the skills and knowledge) which in turn improves the decision-making process of the board.

Boards must be proactive in encouraging diversity and should employ diverse methods to recruit new members. But the most important thing is to ensure that all directors are the importance of incorporating diverse perspectives in boardroom discussions. If everyone is aware of why and how this will benefit the company board members will naturally encourage the exchange of diverse perspectives.

site here

Leave a Comment

Your email address will not be published.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