Board Diversity in the USA

CEO Evaluation

Business influencers have been increasingly vocal about board diversity. The debate has primarily focused on: gender, age, and ethnicity. Having a board that reflects and understands the values and perspectives of your organization’s current and future customers is essential to sustaining organizational relevance. Board and executive leaders must promote diversity of perspective when considering who is best qualified to meet the leadership needs of their organization.

Following the European Union’s boardroom gender diversity mandate, California passed Senate Bill 826, requiring public companies based in California to have at least one woman on their boards by the end of 2019. According to Forbes, nearly  40% of new directors on Fortune 100 boards in 2016 were women, but women are still woefully underrepresented on boards. According to executive search firm Stanton Chase, diversity contributes to strategic value, brand perception, and benefits a company’s bottom line making gender diversity “a strategic investment”.

Board member age has been an aspect of diversity rarely considered or challenged in the past. A vast majority of public and private equity backed directors tend to be white males above the age of 50, often the result of a recognition of their time-earned expertise and reputation in their professions. These are important characteristics; however, there is a need to consider the multifaceted nature of expertise that is not solely gained through years of experience.

Organizations must adopt a well-rounded view in considering how to have diverse view points around the table to adapt to the current disruptive and innovative business climate. For example, research conducted by MNI Targeted Media shows that millennials now represent the largest consumer spending group in the United States (accounting for 40% of all spending). Having insights into millennial’s priorities at the board and executive level will provide for a competitive and forward-looking perspective, which is now being recognized by some leaders. According to PwC’s Census of Directors 50 and Under, 90% of directors say that age diversity is important. As technology continues to disrupt at an increasing pace, having younger members may assist the board’s effort to look forward and around the corner of the competitive landscape. Qualified younger members understand innovation and digital transformation and bring an otherwise missing perspective to the decision making process.

Finally, ethnicity and race continue to be an important topic in the discussion about diversity as demographics continue to change globally. The U.S. Census Bureau estimates that by 2050, the country’s population will have grown by approximately 75 million people, and those residents will have a vastly different racial profile than today’s population. The changing demographic trends require that companies change as well, or then risk becoming irrelevant. Through boards around the world, we gain insights into the changing perspectives on diversity.

During a recent assessment interview with a 60+ year old white, male, Fortune 500 director, he shared that his opinion of the importance of diversity has dramatically changed. Whereas he thought it was a political or social issue ten years ago, he and many of his colleagues are witnessing the benefits of diversity represented on the boards they serve today. He noted that he enjoys the meetings more, appreciates the diverse perspectives, and believes the board’s performance is improving. By starting with transformation in the boardroom, leading organizations are dedicating resources to ensuring that they holistically represent their customers, employees, shareholders, and other stakeholders.

What are the benefits of a diverse board? Having a board comprised of diverse gender, age, race and ethnicity:

  • Promotes a more multifaceted discussion of strategy and the competitive landscape.
  • Brings in new and broader perspectives.
  • Optimizes members’ diverse backgrounds, creating new connections for the board. 
  • Maximizes opportunities for advancement – especially in technology and innovations.
  • Minimizes the development of “Group Think.”
  • Promotes a culturally inclusive environment that is attractive on the global stage.
  • It’s the right thing for culture progress (passes the “smell test”).

More on board diversity

In his article, “Reboot, Not Refresh”, published in International Banker, our CEO, Byron Loflin, writes about diversity and optimizing board composition.

Discover how our partner, Stanton Chase, a global specialization leader is the top diversity and inclusion executive search firm.

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