Board diversity is not just about gender
Board diversity can be misunderstood or at least narrowed because we don’t appreciate the depth of the term. This guide will help.
It’s crucial to remember that “boardroom diversity” is not a static goal. You can’t simply define it, achieve it, tick the box and move on.
Instead, it’s a fluid concept, evolving with the changing needs of companies and their desire to serve all stakeholders, not just investors.
It’s important to realise that now because boardroom diversity is a hot topic that’s getting hotter. Define it narrowly, and you might not put the right goals in place.
What board diversity is not
It is not just a gender or ethnicity-based headcount. These components will often form part of boardroom diversity goals, but they alone will rarely clarify a company’s diversity record.
Politicians and the media will often shape the word ‘diversity’ in our heads, and that meaning only explores a slice of the issue. We need to think bigger.
What is true boardroom diversity?
As the concept is evolving, there is no single correct answer.
Broadly, definitions focus on varied backgrounds, aligned principles, and a company’s willingness to embrace it all.
Here are standard components that companies examine when striving for boardroom diversity.
At their core, boards are supposed to be a collection of learned, skilled professionals. But something must be fixed if the entire board is skilled in only one area.
Skill sets should shine in their variety.
Some skill sets are commonly sought, like finance know-how and sales experience. But newer skill sets are also in demand, like HR and digital transformation. These reflect the changing nature of business and the desire for better employee welfare and cyber defences.
It’s prevalent in the corporate world to focus on gender for a good reason.
Boards are moving away from being dominated by men, and the number of women with a seat is increasing as a result.
Often, you’ll find that this change has been spurred (or at least aided) by new laws demanding that women hold a minimum number of board seats.
In the EU, for example, a recently adopted directive will require 40% of NED (non-executive director) positions, and 33% of all director positions, to be held by women from 2026.
Remember, though: the law isn’t – and should never be – the sole motivator. Companies now recognise that increasing the number of women on boards adds crucial perspectives and insights and is a more accurate representation of stakeholders.
Businesses increasingly work in multicultural societies, engaging with people from various backgrounds. Because of that, ethnicity is a common consideration in board diversity.
The reasoning is primarily the same as gender. Varying ethnicity gives boards makeup that more accurately represents the stakeholders they engage with.
Sometimes, it’s glossed over, but age can be important for boards.
Typically, boards pick older candidates to fill seats. They do this because natural bias steers them this way. They want more experience and a longer track record – so more senior candidates are the ones they go for.
However, companies are questioning the “universal benefits” of this way of thinking. In reality, many could benefit from picking candidates with the most relevant skill set, even if they’re in their 30s as opposed to their 60s.
It could also be the case that the younger candidate has fresher ideas and higher energy than their older colleagues – a benefit in many teams.
How many non-executive directors (NEDs) or independent directors does your company have? Does it have any at all?
These kinds of directors are essential to a healthy board.
Having no involvement in day-to-day business, NEDs/independent directors have a unique, unbiased viewpoint, and this is perfect for offering impartial advice and scrutinising fellow board members.
Independence is a core focus when it comes to diversity. Companies will commonly want to make sure their board has the right mix of executive and non-executive voices.
Diversity in the boardroom is a fluid topic.
Many will hear the term and jump to counting the number of women on boards. While gender is important, the complete picture covers more.
What’s important is to make sure your board aligns with your company and shareholder values. This means considering all of the components above.