Corporate Board Diversity is a term used to describe the broad diversity of demographic attributes and capabilities within a boardroom. This may include gender, age as well as educational background as well as professional experience, competencies as well as philosophies, cultural identities and sexual orientation, race and religion. This diversity can provide an array of perspectives and skills to meet the business and future needs of the business.
A successful business requires a board that is capable of doing its job. Therefore the composition of the board should be designed to help achieve this objective. Diversity is a way the board can achieve this goal by encouraging different ideas, perspectives and leadership styles that support a greater awareness of risk.
In this regard investors are increasingly insisting that their companies have a diverse board. Some of the largest institutional investment firms are actively voting against board members who do not conform to their standards of gender and racial equity. For example in August of 2017, CalPERS, a pension fund for state employees, sent letters to 504 of the companies listed on the Russell 3000 index and demanded that they create an action plan and policy to achieve diversity.
Certain states also pass 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 certain number of women and minority directors on their boards by 2021. Companies are also required by law to reveal the diversity of their board members, including ethnic and racial. of their board.
