Diversity in boardrooms has been a hot topic. Shareholders and institutional investors are putting the pressure on companies to increase their diversity. They are also being pressured to improve their diversity, as the presence of diverse boards can show that a company is advancing and has a positive impact on reputation of the brand. It also helps improve the culture of the company by creating boardroomsales.com a more inclusive, equal environment.
However, the evidence on impact of diversity on boards is mixed. Numerous studies have demonstrated positive impacts, but others have found that different forms of diversity could have distinct impact. Gender diversity is, for instance, correlated with firm performance when it comes to accounting returns but not for market returns. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.
Additionally, it has been found that individuals who are minority groups or tokens within an organization tend to self-censor by not sharing their views and beliefs that are contrary to those of the majority of the group. This can prevent the full benefits of cognitive diversity from being realized. The age of directors can affect the way they make decisions in a boardroom. Managers of older age are less likely to adopt new ideas and make changes than younger managers. This is referred to as the “selection biased” effect. This is the reason why it’s important to include young directors on the board and not only pay attention to gender diversity.
Comment