The debate of board diversity has been a hot topic for many years. While most recognize the value that it brings, one can’t argue the findings of a diverse board and its effects to any organization with most people agreeing that it brings unique perspectives and approaches to boardroom issues. In recent years investors have become increasingly aware of board diversity and often screen prospective companies on their policies and practices in their initial investment criteria.

According to research conducted by a 2018 PWC global survey, 94% of directors say board diversity brings unique perspectives to the boardroom and 84% say it enhances board performance. However, 52% think that board diversity efforts are driven by political correctness and 48% say shareholders are too preoccupied with diversity. It is interesting to see that a majority of people know it brings positive aspects to a board, yet more than half are doing it to merely check a box or think investors give it too much thought. Many interesting debates to be had around this!

According to statistics from IR Magazine, over 30 percent of small cap companies set board diversity targets, which is the lowest compared with 40 percent of mid and large cap companies and 42 percent of mega cap companies and with 38 percent of companies globally planning to enhance their diversity and composition. Interestingly, only 34 percent of North American firms are inclined to set board diversity targets for themselves compared with 35 percent in Asia and Europe being the most inclined with 45 percent of companies setting targets to increase board diversity.

A large number of investors now list board diversity among their top priorities when selecting companies to invest in. I talk about this further in previous articles I have written namely, “The Fearless Girl Update”, “Women CEOs – is the equilibrium being reached?” and “Board of Directors – composition, contribution and collaboration.” According to research, nearly one third of investors have asked about diversity of boards of directors. Small cap company IROs have seen around 20 percent of people ask questions related to board diversity within the past year while mid cap IROs 24 percent of the time and 52 percent and 54 percent of the time at large and mega cap companies respectively.

In the ever changing and complex business and trading environment today it begs the question if quotas for board diversity will bring significant and visible changes and if so, how long until we can see the positive effects globally? And also, if compliant companies are doing so as they whole-heartedly believe in the idea and to affect positive change or merely fill the seat. Having been fortunate enough to work in many different countries, regions and organizations across the world, I can personally attest to the fact that a diverse mix of people and voices, from Board level down to entry level staff always leads to better discussions, collaborations and results on any project, which is surely the best outcome for any business.

Sources:

PWC 2018 Annual Corporate Directors Survey, October 2018
IR Magazine