Corporate Board Diversity is a term used to describe a wide variety of demographic characteristics capabilities and traits within the boardroom. This could include age, gender education as well as professional experience and skills as well as philosophies, cultural identities, sexual orientation, race, and religion. This diversity will help create a useful range of perspectives and capabilities that serve the business needs and future of the company.
A well-performing board is crucial to a successful business This is the reason why the composition of a board should be designed to support this objective. Diversity is one way that the board can reach this goal through fostering different mental, leadership and emotional styles that support a greater awareness of the risk.
Investors are therefore increasingly demanding that board members be diverse. Certain large investment firms are actively voting against board members who do not conform to their standards of gender and racial equity. For example, in August 2017, CalPERS, a pension fund for state employees, sent letters to 504 of the companies on the Russell 3000 index and demanded that they create a policy and implementation plan for achieving diversity.
Certain states also adopt regulations that force companies to adopt measures to achieve board diversity. California for instance, requires that public companies with their headquarters in the state must have at least a certain amount of female directors and directors from minorities that are underrepresented on their boards by 2021. Additionally, companies are also required to report on the racial and ethnic diversity of their boards.