Corporate Board Diversity
Corporate Board Diversity is a term used to describe the wide variety of demographic characteristics, traits and abilities that can be found within a boardroom. This could include gender, age, educational background, professional expertise and experiences, philosophies and identity, race and sexual orientation, and religion. This diversity can help cultivate a useful range of perspectives and abilities to meet the business and future needs of the company.
A well-performing board is crucial to a successful business and that is why the composition of a board has to be designed to support this objective. Diversity is one way that the board can achieve this goal by encouraging different leadership, thinking and emotional styles that promote a greater awareness of the risk.
Investors are increasingly demanding that directors be diverse. Some of the largest institutional investment firms are actively voting against board members who do not conform to their standards of gender and racial equity. For instance, in August 2017, CalPERS, a pension fund for state employees, wrote letters to 504 of the companies listed on the Russell 3000 index and demanded that they come up with an implementation plan and policy for achieving diversity.
Certain states also adopt laws that require companies to adopt measures to ensure board diversity. California for instance, requires that public corporations headquartered in the state have at a minimum a certain number of female directors and directors from minorities that are underrepresented on their boards by 2021. Companies are also legally required to disclose the diversity of their board members, including ethnic and racial. of their board.
