January 19, 2011 1 Comment
In a recent post, founder and CEO of Marcus Venture Consulting, Lucy P. Marcus, asks Why Board Diversity Really Matters? Should Board Diversity be seen as an opportunity, a possible way for companies to increase their profitability, or as a risk, an obstacle to social integration and cohesion within the Board? What do you think?
Research shows that diverse groups tend to be more creative and perform better on problem-solving tasks than homogeneous groups, so I was wondering if what is true for the workplace in general is also relevant at the Board level. I personally believe that it is…If we consider diversity, as the author does, in the broader sense of the term, i.e. not just a matter of gender but also age, race, ethnicity, experience, or even sexual orientation for example, then we can conclude that more diversity at the Board level will have a positive impact on the profitability of the company, as Board members will find new, and more creative, ways to face challenges, especially during economic downturns, spot talent, within and outside the company, and, more importantly, develop innovation.
As mentioned by SEC Commissioner Luis A. Aguilar in a speech at Stanford Law School in September 2009, diversity in the boardroom results in real value for both companies and shareholders :
“The California Public Employees’ Retirement System’s (CalPERS) recently commissioned a report that found companies that have diverse boards perform better than boards composed of directors with similar profiles in terms of ethnicity, gender, and skills sets. The report — Board Diversification Strategy: Realizing Competitive Advantage and Shareowner Value — stated that companies without ethnic minorities and women on their boards eventually may be at a competitive disadvantage and have an under-performing share value. The report also found that a selected group of companies with a high ratio of diverse board seats exceeded the average returns of the Dow Jones and NASDAQ indices over a five-year period.”
The definition of diversity is an important factor to consider. I tend to use it, as Lucy Marcus does, in the broader sense of the term. However, if the definition is too broad, then it could be used as a convenient excuse to hide the real issues. For example, age could be used to give a false sense of diversity in a company which Board is composed of young and older white men only. That’s why I think that using gender as the primary indicator to measure diversity would be the right way to ”raise the bar”. I personally believe that this world needs more women at key leadership roles - both in politics and business – as women have the ability, that men rarely have, to choose their subordinates, collaborators and peers based on a wider range of criteria than men do. For men, co-optation remains one of the main ways to select and promote collaborators. I mean by that, that the more women there is at the Board level, the more other minorities will follow, developing diversity.
In fact, one of the main argument I’ve heard against diversity is that it may prevent social integration and reduce cohesion within a group. Diversity is therefore seen as risk that could for example slow down the decision-making process and divide teams. Obviously that would be a grave issue at the board level. However, just like Lucy, I see Board Diversity as a big opportunity rather than a risk…What is your opinion?