Diversity Leads to Good Governance

October 24, 2017

 

One can only wonder how far a company can go and grow if its board of Directors was as diverse in its thinking and leadership as either the company’s clientele or even its employees. Diversity of perspective is critical and is usually sought after by nomination committees. Traditionally though, industry has been the key diversity pivot for these groups. Healthcare, government, tech, legal are the kind variety of perspective that made up a well rounded Board. But, what of  Race, gender, cultural background, sexual orientation? How can the inclusion of various subcultures bring fresh ideas, thoughts and leadership to a Board of Directors.

 

Consider:

Having a wide range of perspectives represented in the boardroom is critical to effective corporate governance.

  • Having multiple views on the possible outcomes of any action makes for a decision-making process that is more likely to take into account the various risks, consequences and implications of possible actions. “Increasingly, boards are in a fishbowl of scrutiny from investors, the media, non-governmental organizations and so on. The problems that boards are grappling with are too hard for any one person to figure out,” one director told us. Another director observed that, “You want directors to have experience in dealing with risk from many angles because you don’t know where your risk is going to come from. Having directors from very diverse backgrounds really helps.”

  • A board needs to take into consideration all of its constituencies. While no one disputes that a board’s first responsibility is to the company’s shareholders, those shareholders suffer without the support of customers and employees. A diverse board allows for the group to better anticipate and consider the concerns and perspectives of all key constituencies.

 

 

Source- Russel Reynolds and Associates inc.  study “ Different is better- Why diversity matters in the board room

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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October 24, 2017

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