Why Should My Company Care if Our Board Is Diverse?

New research indicates that corporate board diversity is a key differentiator in global success. Will your company benefit from this marketplace advantage?

Photo by Shutterstock


Photo by Shutterstock

Q. Why should my company care about whether the board of directors is diverse? And how do I, as a diversity practitioner, help make that happen?

A. Board diversity has several benefits. It gives organizations new ideas and innovative solutions at the strategic level; it helps attain and retain the best talent; and it helps organizations market and protect the brand.

Most companies have a great deal of difficulty getting gender and racial/ethnic diversity on their boards, even though the talent pipeline from those groups is growing. While 60.4 percent of master's degrees went to women two years ago, according to the National Center for Education Statistics, and more than 15 percent went to Blacks and Latinos, the Fortune 500 is very low in board diversity.

According to the Alliance for Board Diversity, 15.6 percent of the Fortune 500's boards are women. The DiversityInc Top 50, in comparison, averages 23 percent and the DiversityInc Top 10 averages 30 percent. Only 12.7 percent of the Fortune 500's boards are Black, Latino and Asian. The DiversityInc Top 10 and Top 50 are close to 30 percent.

SEC Commissioner Luis Aguilar echoes the connection between board diversity and business results in an interview with DiversityInc CEO Luke Visconti. Aguilar states that "companies with better performance seem to have more diverse boards." A new report by the Committee for Economic Development (CED) contends that giving women a seat at the table and providing adequate talent development not only can deliver measurable business gains but is the key differentiator in future global success.

Jim Turley, global chairman and CEO of Ernst & Young, No. 6 in the DiversityInc Top 50, acknowledged the link between board diversity and company performance, stating: "We have focused on diversifying our board because we know it enables our firm to perform better."

With the best available talent, boards are more likely to identify and select diverse senior leadership. DiversityInc Top 50 data also shows a positive correlation between diverse boards and diverse executive-management teams. According to the EEOC, national senior leadership in private industry is 11 percent Black, Latino and Asian and 28.2 percent women. In comparison, the DiversityInc Top 50's senior leadership is 17.7 percent Black, Latino and Asian and 24.1 percent women. The DiversityInc Top 10's executive management is even more diverse.

Diverse boards can ensure that contributions align with company and shareholder values related to diversity and inclusion. In "Are Political Donations That Conflict With Your Diversity Policy a Shareholder Issue?" NorthStar Asset Management's Julie Goodridge and Christine Jantz show how corporate political contributions that violate company values risk the company's good name and shareholder value.

Best Strategies to Diversify Your Board

Based on our data and sustainable results, we recommend the following approaches:

  1. Mandate diverse slates for every board opening.
  2. Do not look at the "usual suspects," those same women, Blacks, Latinos and Asians you see on so many corporate boards. Look down a level or two to people with great ideas who may be younger or have not yet achieved your "qualifications."
  3. Maintain clear communications between the board and your chief diversity officer so everyone understands diversity strategies and priorities. At 96 percent of DiversityInc Top 50 companies, the chief diversity officer presents directly to the board, up from 92 percent five years ago.

For more on board diversity and diversity in recruitment, view our Diversity Web Seminar on Recruitment: 5 Workforce-Diversity Strategies to Find, Engage & Retain Talent.

—Shane Nelson

EY's Sam Johnson: 'Sponsors Put Their Chips on the Table to Help You Get to the Next Level'

Sam Johnson, EY's Americas Vice Chair and Southeast Region Managing Partner, talks about the importance of sponsors, his passion for early childhood education and why it's critical for Black and Latino kids to get involved in STEM early.

By Alana Winns and Christian Carew

Read More Show Less

Walmart Apologizes After Their Website Describes Wig Cap as 'N****r-Brown'

Leading retail chain Walmart has apologized for allowing a third-party seller to list a racial slur in the product description of a hair product.

Global retail chain Walmart has come under fire for the oversight of a racial slur used on their website. REUTERS

The hypermarket retail chain Walmart (a DiversityInc 25 Noteworthy Company) has apologized after failing to realize that their website used a racial slur to describe a wig cap that was being sold on their site.

Read More Show Less

Dwayne 'The Rock' Johnson, Misty Copeland, Stephen Curry Oppose Under Armour CEO's Praise for Trump

"The personal political opinions of Under Armour's partners and its employees were overshadowed by the comments of its CEO (Kevin Plank)," said Johnson.

Dwayne ‘The Rock’ Johnson / REUTERS

Various companies have been publicly praised or shunned during the past 18 months in response to their approach to then-candidate and now President Donald Trump.

Read More Show Less

EY-Peterson Institute Study Shows Correlation Between Women in Leadership and Profitability

Study shows that an organization with 30 percent female leaders could add up to 6 percentage points to its net margin.

New research from The Peterson Institute for International Economics and EY shows that having more female leaders in business can significantly increase profitability. The report, Is Gender Diversity Profitable? Evidence from a Global Study, reveals that an organization with 30 percent female leaders could add up to 6 percentage points to its net margin.

Read More Show Less