By the end of 2021, boards with five members will have to ensure at least two of them are women. Boards with six members will need to maintain 50:50 men to women ratio. The expectation is that this diversity will reform the corporate world and open up balanced opportunities for all.
Apart from gender, age, education level, race, and professional exposure may be used to qualify members of the diversified boards. A person’s attitude and exposure to different experiences can be used as a qualification to serve abroad.
Diversifying executive boards aims to enrich laid-out organizational strategies and to see that they are effective in the running of the company.
Benefits of Diversified Executive Boards
Diversified board members possess different personal characteristics, which lead to dissimilar leadership styles, risk appetites, and perceptions on prevailing issues. There are several advantages to this.
- Alongside gender balance, diversity is known to birth effective decision-making as well as strategy execution. The combination of different backgrounds, skills, and experiences fosters extensive analysis of issues. The members also have a broad perspective on issues and can vigorously engage to find solutions.
- It also places the organization in a better position to monitor the effectiveness of the organization’s practices. In a ‘groupthink’ setting, executives tend to cover up for each other on unmet expectations but when the board is diversified, members have the freedom to ask the hard questions.
- It becomes easy to brainstorm. While the board members have diverse backgrounds, decision-making can be tedious and with conflicts. But, in the same breath, room for critical thinking is created. Ideas are evaluated keenly and alternative solutions are found.
- Positions the company strategically for investor relations as the company gains status as a reputable corporate citizen. A diversified executive board reflects the organization as an enabling environment for equal employment opportunities. If the stakeholders feel there is no discrimination against the minority, they can view the company as socially responsible. This reinforces the social contract between the business and stakeholders. Any company whose board is diversified is deemed a responsible corporate citizen, strategically fit for the environment, and deserving of the community’s trust.
3. Better talent pool utilization
Traditional board executive appointments are limited to a certain caliber of people. Often, they are well-known, wealthy, and highly educated individuals whose devotion is compromised by their already busy schedules. This limits the talents they bring into the pool.
If the selection would be expanded to include diversified attributes such as women, young professionals, ethnic minorities, and diverse entrepreneurs, the board would be rich with talent. This would seal the gap of directors’ shortage by tapping and utilizing the talents.
Another key aspect to boosting the productivity of the board is ensuring the board has representatives of consumers of its products. This ensures the discussions are more factual.
For instance, international companies ought to have international representation for them to appeal to their audience. Such considerations entice competitors and help address raised issues in a more approachable manner.
Possible costs of board diversity.
- Interviewing, vetting, and orienting diverse executive members takes time. It also takes time to have them settle and work coherently and prove themselves trustworthy.
- New board members can waste a lot of time trying to fit in with others are working on. This may bring complacency.
Given the level of expertise needed and at the same time a genuine and close connection with the clients, a diversified board is needed. Being all around, it serves best offering skill, time, networking, and consistency in following up the execution of set strategies.
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