Corporate Board Diversity
Corporate Board Diversity is used to describe a wide range of demographic characteristics as well as attributes and abilities within the boardroom. This can refer to gender, age, education background, professional expertise and experiences, philosophies and identity, race, sexual orientation, and religion. This diversity can help cultivate a useful variety of perspectives and skills to meet the current and future needs of the company.
A successful company needs a board that is capable of performing well. Therefore the composition of the board should be designed to meet this goal. Diversity is an effective way for the board to attain this goal. It promotes different leadership mental, thinking, and emotional styles which support the understanding of the risks.
Investors are increasingly demanding that board members be diverse. In fact, some large institutional investment management companies are beginning to vote against https://board.international/how-to-increase-corporate-board-diversity/ board members of companies that fail to meet their standards for gender and diversity. For example, in August 2017, CalPERS, a pension fund for state employees, sent letters to 504 of the companies on the Russell 3000 index and demanded that they develop a policy and implementation plan to achieve diversity.
Certain states also have regulations that force companies to adopt measures to achieve board diversity. For instance, the state of California requires that public companies with their headquarters in the state have a specific number of minority and female directors on their boards by 2021. Companies are also required by law to reveal the racial and ethnic diversity of their board.