23 August 2016 by Henry Ker
The latest survey of the Governance and Compliance/Core community
Boardroom diversity remains a key conversation for companies, so this month we asked the Governance and Compliance/Core community about ethnic diversity. The latest FT−ICSA Boardroom Bellwether survey of the FTSE 350 found 34% of respondents consider their board to be ethnically diverse, however just 19% of our survey’s respondents feel the same, with 74% saying they do not and 7% answering ‘maybe’.
We also asked whether respondents believe their companies are committed to improving ethnic diversity at senior level. Here the results are more evenly split, with around a third for each answer − 34% ‘yes’, 30% ‘no’ and 36% ‘maybe’.
Despite this negative view about their own board’s diversity, when asked ‘how do you think ethnic diversity contributes to the success of a company?’ the vast majority are positive. One respondent summarises: ‘A diverse group of individuals is generally recognised to be higher performing’ and another ‘diversity of views, cultures and backgrounds helps in decision-making’.
Several answers expand on this, with one stating ‘A successful board is able to assimilate and apply innovative thinking to set strategy and direction. Diversity of experience is the bed rock for such an approach and therefore all elements are important. Gender and ethnicity with a profound element of openness and inclusion are a must.’ Another agrees ‘Current research shows ethnically diverse companies outperform less ethnically diverse rivals. Correlation doesn’t always equal causation but it hints at employee satisfaction, increased productivity and so on.’
Many focus on diversity being important because ‘Like any form of diversity, it provides a different perspective and reduces group think’, and a second agrees, saying, ‘Diversity relates to more than just ethnicity, also gender, age, background. The danger of having identikit boards is that group think can prevail where everyone agrees with each other as a matter of course … Bringing in a more diverse range of opinions lessens this risk and can make for a more responsive board.’
Some qualify their view on this by saying that ‘it depends on the business whether it is relevant or not’, or ‘It may depend on the sector, but should contribute to the depth of debate’.
There is some scepticism, however, around the value of diversity to the board: ‘I’m sceptical that specifically ethnic diversity contributes to the success of a company. I view general diversity (in terms of background, skills, experience) to be of greater importance.’ Another also touches on this ‘I am not sure that it does [contribute to success] − the right individual for the roles offered contribute far more than specific ethnicity (or gender for that matter)’, while one says ‘It doesn’t, it’s just politically correct. Directors should have the right skills not just fit ethnic diversity’.
Although it is important to recognise diversity is not just about ethnicity, it is a key component of the debate. As one respondent suggests, ‘Diverse opinions make for good debate. Diversity isn’t just about ethnic backgrounds, it’s about people with different perspectives and backgrounds bringing their experience to the boardroom’, and another ‘Diversity of any kind is likely to mean those sitting at the boardroom table are able to offer views from a broader spectrum of experience and knowledge such that a fuller range of views can be debated and the quality of decision making for the board as a whole is improved.’
If diversity does lead to better decision making, and as the research suggests more diverse boards outperform their contemporaries, organisations should be looking to diversify across all areas, including gender, ethnicity, culture, skills, age and personality type. Not an easy achievement but one worth pursuing.
Conducted in association with The Core Partnership