A modern company needs a modern board—one that mirrors its workforce and customer base. Companies still fall short of this ideal but their stakeholders, including investors, will increasingly expect to see a shift.
Progress towards greater gender diversity on boards is happening but change has been slow. My colleague, Marianne Sandén Ljungberg, is the CEO of Mazars’ operations in Sweden and leads Mazars Group’s thinking on diversity. She acknowledges the power of established, male-dominant board structures but sees their influence being eroded. She sees more women are being appointed to be CEOs which creates the opportunity for more people to assume senior positions at board level.
Boards have so far focused on tackling gender diversity – and this effort must continue – but I think they need to look beyond it towards establishing a better mix of social, ethnic and educational backgrounds. Action to tackle these less visible areas of diversity lags much further behind that of gender.
There is general acceptance that a diverse board can produce many business benefits. In meetings where there is a diverse mix of people, for example, directors tend to behave differently, talk differently and think differently. If diversity is working well you would hope that it would lead to an engaged board—good relationships that allow a high degree of challenge as well as a high degree of support. The benefits of being an engaged board are clear: greater success in innovation and new ventures; setting the right example for the rest of the business; better decision-making; and a robust and agile approach to risk management. Board diversity isn’t the only determinant of an engaged board, but it is certainly key. True diversity ensures the board has the right blend of skills, experience, personalities and perspectives.
Creating more modern boardrooms will not happen overnight. As they move forward, companies need to be more open about the challenges they face. This could involve cultural change so that people from different backgrounds feel more welcome on the board. Companies must make sure they are addressing any subconscious biases that might exist in the recruitment and promotion process so they are giving members of their diverse workforce equal opportunities to develop their full potential.
There may also be problems finding people from different backgrounds, with the right skills, who want to join boards; companies are keen to increase their technology expertise in the boardroom but the IT industry itself has to improve its own diversity first. I know it’s not easy but boards need to take a long hard look in the mirror. If they don’t reflect the changing face of the business and society, then their days are numbered.
This blog is based on an article, “Diversity: take a look in the mirror” which appears in the Spring 2017 edition of Board Agenda. The full article can be found at Board Agenda.