There is an increasing awareness of corporate leaders and investors that diverse boards help companies better serve their customers, consumers, employees and communities. Recent debates over gender and race equality in the workplace has also led to state laws that increase and encourage diversity in corporate boardrooms.

Numerous studies have proven that more diversity on boards is associated with higher company performance. A 2015 McKinsey study found that companies in the top quarters for diversity of race were 33 percent more likely than those in the bottom quarter to outperform them. Another 2016 study found that women on boards are associated with lower earnings volatility and better stock liquidity as well as higher opinions of investors about the firm’s value.

These findings show that cognitive diversity can enhance board decision-making and increases the ability of boards to effectively supervise and mentor management. Furthermore the diversity of demographic characteristics, such as gender, race, and age can contribute to a more inclusive and respectful atmosphere in the boardroom, which encourages healthy debate and a free exchange of ideas.

Another crucial aspect is functional diversity, which refers to the wide range of experience and education that board members bring to the table. The diversity of functional attributes, such as tenure and educational background enhances the ability of the board to comprehend the cognitive resources of the group members (such as knowledge and talents) which leads to better decisions for the board.

Boards should be proactive in encouraging diversity and should employ different strategies to attract new members. The most important thing to do is make sure that directors are aware of the importance of incorporating diverse views into boardroom discussions. If everyone is aware of why and how this benefits the company board members will naturally encourage the exchange of views from different perspectives.

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