07 September 2015 by Henry Ker
This summer’s FT–ICSA Boardroom Bellwether revealed how respondents from the FTSE 350 view the diversity of their boards. The results yielded a mix of predictable (79% consider their board diverse in terms of business experience) and worrying results (only 23% consider their board diverse in terms of ethnicity). Anthony Hilton has also explored the merit of boardroom diversity. He writes: ‘there is ample research to show that organisations with greater gender diversity outperform similar businesses which are not diverse’. With this in mind, we asked the Governance and Compliance/Core community whether it considers their board diverse – in terms of gender, race and ethnicity, disability, religion, sexuality, class and age – and if diversity does in fact help improve strategy and decision making.
There is an even split in the responses to this question, with 48% considering their board to be diverse (10% ‘very diverse’ and 38% ‘moderately diverse’) and – perhaps surprisingly – more than half (52%) answered that their board is not diverse (37% ‘not very diverse’ and 15% ‘not at all diverse’). These results back up the troubling trends also seen in the Bellwether survey – only 42% of respondents expect to meet Lord Davies’ target of 25% women on boards by the end of the year, and 63% of those not expecting to reach the target have no plans to in the future.
These results are more concerning in light of the community’s further responses. When asked if a more diverse board helps to improve strategy and decision making, the overwhelming majority (78%) answered that it does. Only 8% answered ‘no’ and 14% said they are unsure. Despite this response – and numerous research that suggests diversity improves a board’s strategy, decision making and overall corporate performance – there are several respondents who were vocal in their disagreement: ‘Depends who the diversity brings in. Cannot in itself say diversity will improve the board. Ludicrous to think otherwise’. This, along the traditional argument of a lack of ‘board ready’ diverse applicants is all very well but unless the trend is bucked, there will never be a diverse pool of experienced board members. One respondent directly addressed this: ‘Boards just do not seem to have got the diversity issue. Everything points to a better performing company if the board is diverse but if comments such as, “but it is ok that the board does not have any women on it because we have someone from the visible minorities”, can be made there is not much hope for the future’.
Most however took the ‘yes’ stance. One individual said: ‘Yes, simply because different backgrounds will provide different perspectives’ and another ‘A diverse board can bring a much higher quality of debate. The questions and challenges posed by people from diverse backgrounds around the board table will help a business to have a wider perspective and create business plans which better fit the needs of a more diverse range of customers.’
Some qualified this view though: ‘Even if you tick every diversity box, it is no good if your board all have the same work experiences – a board made up entirely of chief executives can mean they all try to do the CEO’s job and not the board job.’ Diversity means more than gender or ethnicity – it is needed in all areas to achieve board effectiveness.
Conducted in association with The Core Partnership