The benefits of diversity on boards are now well-documented, and the efforts to ensure more representation of minorities and gender in boardrooms are beginning to pay off. The impact of diversity on corporate performance is still largely unexplored.
The most common argument is the fact that a board comprised of a greater diversity of ages and genders will have a larger knowledge base. This knowledge would not be accessible to people of all ages and women who are all the same. A board with more diversity is expected to be more “cognitive” and will explore many options when it comes to how to move the company forward.
There are also other factors to consider. Individuals who are considered tokens or minorities in a group may self-censor or avoid expressing opinions and beliefs that are in opposition to the majority. In the end, the board might not be able take full advantage of the intellectual diversity it has incorporated into its composition.
Furthermore, even though research from academics suggests that demographic diversity could have a positive influence on board decisions, it indicates that this isn’t the only thing to consider. Other aspects, such as board member independence and educational qualifications as measured by the amount of years of education that have been completed beyond a bachelor’s degree, can significantly impact performance.
Companies that want to improve their boardroom composition need to be innovative in the search for new members. For instance, they could look into reaching out to businesses and universities to find potential candidates. They could also create task forces tasked with exploring the areas where the most qualified candidates might not be easily identified. This is a more efficient approach to increasing diversity than relying on consultants, whether internal or external.
