Benefits of a Diverse Boardroom
Business partners, researchers, and scholars across the globe have stepped up their levels of focus when it comes to having a company board be more diverse. There are many benefits of a diverse boardroom that go beyond just having the relevant qualifications.
As you are probably aware the board room is where strategic decisions, risks are assessed, and governance is applied for the company. So, it makes sense that in this crucial area of the business, there is the right mix of skills, qualifications, backgrounds and experience. Our societies, in general, become even more diverse when you take in the talent-driven market we operate in. Diversity in the boardroom becomes a whole lot clearer.
Many businesses began reflecting on their board composition after the recession back in 2008. Many believed that corporate failures may have been as a result of a lack of boardroom diversity. It’s easy to see why. Boards made up of members who share similar backgrounds, education, experience and gender would struggle to avoid “group thinking”. This term is used to describe the tendency of people within a group setting to decide to reduce any friction within the group. This limits the board’s ability to think of new ideas, different perspectives or even more so challenge the ideas suggested in a boardroom.
Benefits
As mentioned board diversity is more than just age, race, background, qualifications, experience and skill. It also takes in factors that are often less tangible than others. Things such as attitudes or personal convictions. There have been numerous research studies which have shown a strong link between board diversity and financial performance as well as value creation. Benefits of board diversity include:
- Better Decision Making
- Larger Talent Pool
- Improved Customer Insight
- Improvement in relations with Investors
- Robust Corporate Reputation
- Better Corporate Governance
The reason for board diversity is to improve the overall quality of the board while adding more objectivity to the decision-making process through a more open debate with new voices. It will lead to creativity, innovation and a better understanding of the customer. It will also help with problem-solving, ideas and perspectives.
A more diverse board is far more likely to be an effective and efficient board. Board diversity can also be used as a competitive advantage in what is now a global economy and will deliver growth and value to your company.
There are many challenges to board diversity that are present both inside and outside the boardroom, as many directors question the motivation to deliver board diversity. Some directors even feel that this is driven by political correctness as shown in a recent survey by PwC.
Board members should look to have a more open mind to board diversity and welcome it as a tool which will enable a company to reach new levels. Finally, for more details on any of the above. Or if you are looking to source a new executive or non-executive director. Contact us today at enquiries@citytrust.ie or call +353 1 675 3140.
