So, what do we mean when we say “Diversity”? Some of the qualities that comprise diversity include:
- Visible Diversity: This is the quality that most people associate with diversity, yet it can often trip up nominating committees. Far from a “check-the-box” exercise, improving a board’s visible diversity is associated with better company performance. Boards with visible diversity are more reflective of their stakeholders and may identify risks or opportunities that a homogeneous board might miss. Additionally, with women and People of Color significantly underrepresented on corporate boards, there is a largely untapped pool of phenomenal candidates.
- Age Diversity: In the S&P 500, the average age of directors is around 62, while the median standard deviation of ages is 6.9 years. Widening that age range is a huge opportunity for most boards. Directors from different decades will approach challenges differently and will draw from a wider range of perspectives.
- Diversity in Leadership Roles: Many leadership roles can prepare candidates for board roles, beyond Chief Executive positions. CFOs, CTOs, CMOs, CCOs, and CISOs all bring particular competencies from their positions that are relevant to governance. Because fewer women and People of Color are CEOs, looking beyond chief executives will also open up a pool of exceptional candidates that is likely to be more diverse in other ways.
These categories are not exhaustive, but they highlight the variety of forms diversity might take.
If nominating committees broaden their scope and include achieving diversity of thought in their succession planning, the result would be better boards, making better governance decisions, and ultimately creating more value for corporate shareholders and owners. True diversity of thought incorporates a wide range of perspectives to achieve a common goal. Diverse boards generate stronger results and more resilient strategies for the future.