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The Impact of Board Diversity on Corporate Performance

The benefits of diversity in boards are now well-documented, and the efforts to achieve more representation of minorities and gender in boardrooms are starting to pay off. However, the impact of this diversity on performance of companies is not yet fully understood.

One of the most common arguments is that a greater diversity of demographics enhances the knowledge base of a board by providing it with information that would be missing from a homogeneous group of males or women. A board with greater diversity is expected to be more “cognitive” and https://boardroomsales.com/ will be able to consider different options when deciding how to move the company forward.

But there are other elements at play. People who are seen as to be minorities or tokens within the group might self-censor and refrain from expressing opinions and beliefs that contradict the majority. The board may not be able fully to take benefit of its cognitive diversity.

In addition, although research shows that diversity in the demographics can be beneficial to board decisions, it also shows that this isn’t the only factor that is important. Other characteristics, such as board independence and education qualifications, measured by the number of years of schooling beyond a bachelor’s degree, can also have a significant effect on the performance.

To attract new members, businesses should be creative in searching for them. Companies should, for example think about reaching out to universities and business programs to find potential candidates. They could also think about forming task forces that are charged with investigating areas where most suitable candidates aren’t obvious. This is a more effective method of enhancing the diversity of the boardroom than using external or internal consultants to recommend names.

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