How to Move Beyond Quotas and Box Checking to Move Toward Corporate Board Diversity

Corporate Board Diversity

Numerous studies have concluded that diverse boards have a better financial performance. This has led to a fusion of forces pushing companies toward more diverse boards: activism and protests by women and people of color; pressure from shareholders and investors; and a perception that boards with diverse representation are “good” for society.

Despite all this enthusiasm, a lot of companies don’t have boards with a wide range of diversity. Nasdaq reported that, in the year 2000 75 percent of the companies listed on their exchange could not have met the market’s arguably simple diversity requirements. Also, representation of Black, Latinx, and Asian individuals remains disproportionately insignificant, despite the groups making up significant percentages of the US population.

Quotas are one solution. They will require companies to declare the diversity of their boards based on the same template, and have at least 2 directors who self-identify themselves as women or belong to minority groups that are underrepresented, or give reasons for why they don’t. However, relying on quotas as the only way to ensure diversity raises legal concerns, and could stifle the benefits of having more voices at the table.

It’s time to move past quotas and box-checking in favor of a more thoughtful and targeted approach to governance. This means focusing less on the number of women and minorities who are in the room and more on how these voices can be used to improve the company’s performance. This requires a cultural shift which includes creating a space in which it is safe to have challenging conversations and explore different viewpoints.

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