Making change isn’t always easy—doing so effectively often means starting from the top. Improving diversity at the board level is no exception. Luckily, organizations can take proactive steps to overcome the hurdles. In this article, we’ll cover common pain points companies face when addressing board diversity, as well as practical steps for achieving it.
Limited Pool of Diverse Candidates: A challenge often faced is the perceived scarcity of diverse candidates for board positions. But poor diversity recruiting metrics usually are a result of one of these two causes: 1) lack of effort in the recruiting process, or 2) bias throughout the hiring process.
Implicit Bias and Lack of Awareness: Unconscious biases may influence board selection processes, favoring candidates who resemble the existing board members. Outdated recruitment practices mean that boards typically rely on their own networks when filling in positions, which are overwhelmingly white. Surveys show that 75% of white Americans have entirely white social networks with no minority representation. It's no wonder then that Deloitte's 2021 report on board diversity found that approximately 80% of board directors in Fortune 100 and Fortune 500 companies are white. This also helps explain why the fastest growing underrepresented group at the table is white women.
Resistance to Change: Some board members or stakeholders may resist efforts to improve board diversity due to ingrained norms or a fear of diluting the perceived quality of the board.
Lack of Commitment from Leadership: Without strong commitment from top leadership, efforts to improve board diversity may face challenges.
Long Tenure and Board Refreshment: Boards with long-tenured members may resist change and hinder the entry of new, diverse voices. Only 6% of S&P 500 companies and 4% of Russell 3000 companies have term limits for corporate board members. For those who do, 73% have term limits that exceed 15 years. This means opportunities for new voices are few and far between.
Lack of Transparency and Accountability: Without transparency and accountability, progress on board diversity may stagnate.
By actively addressing these challenges, organizations can overcome barriers to board diversity and create more inclusive, diverse, and effective governing bodies.
Now that we know the challenges in our way, what can we do to actually move the needle on board diversity? Well, the most important thing is to take the first step. One widely recognized approach is to collect and analyze data on various diversity dimensions, such as gender, ethnicity, age, and professional background, among board members. This data can then be used to assess the current state of diversity on the board and track progress over time.
By following these steps, companies can effectively evaluate and monitor their governance metrics. This lays the groundwork for building a culture of transparency, accountability, and progress towards more inclusive and diverse leadership structures.
In conclusion, prioritizing board diversity is crucial for organizations committed to sustainable and responsible business practices. By embracing diverse perspectives, experiences, and backgrounds, companies can benefit from enhanced decision-making, improved risk management, and stronger stakeholder relationships. Although challenges exist, proactive measures such as expanding candidate networks, addressing biases, fostering leadership commitment, and promoting transparency can help overcome these obstacles and pave the way for more inclusive and effective governance, ultimately driving long-term success and societal impact.
P.S. Want to avoid the potential missteps to begin with? Check out our previous articles on the ins and outs of board diversity and common challenges to look out for: