Corporate Board Diversity

Corporate Board Diversity is a term used to describe a broad variety of demographic characteristics, abilities and attributes within the boardroom. This can refer to gender, age, education background, professional qualifications and experience, philosophies, cultural identity, race, sexual orientation, and religion. This diversity will help create a useful range of perspectives and skills that can be able to meet the needs of business and the future of the company.

A well-performing board is essential to a successful business, which is why the structure of a board needs to be designed to support this goal. Diversity is one method that the board can attain this goal by fostering different ways of thinking, leadership and emotional styles that promote a greater awareness of risk.

Investors are progressively demanding that board members be diverse. Some of the biggest institutional investment firms are actively removing board members who do not meet their standards for gender and racial equity. For instance, 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 come up with an implementation plan and policy to ensure diversity.

Certain states also have regulations that force companies to adopt measures to ensure board diversity. For instance the state of California requires that public companies with headquarters in the state have a certain amount 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.