Shining a Light on Corporate Boardrooms and the Absence of Diversity
Some things are really clear in life – everyone knows something has to change but no one acts. Maybe it goes back to a common theme in corporate cultures – an unwillingness to stand out and instead rely on silence or what some like to call – “The GM Nod,” meaning everyone acts like they are in agreement but no one is “bold” enough to act on it.
Corporate cultures can fail when they encourage such behavior. Incentives and rewards should be designed to encourage ideas, communications and collaboration. Unfortunately, risk averse strategies can lead to corporate stagnation, and all of this directly impacts the bottom line – the company’s financial performance.
One issue that I have written about in the past (here and here) and it continues to plague corporate boardrooms is the absence of commitment to diversity in board composition. It is an issue that sticks out like a sore thumb in corporate governance and there is no question it hamstrings corporate performance at many levels.
Board diversity is a best practice. It is not a check the box idea but has a direct outcome in business performance. For example, research has confirmed that gender diversity on corporate boards has a direct impact on financial performance of companies.
Nominating committees and CEOs have to revisit the manner and criteria in which they conduct the board selection process. If anything is archaic in the board world, it is the board selection process.
We start with a fundamental premise that is not inconsistent – you can have an effective board that balances three important goals – a mix of qualified board members who have ties to critical constituencies, which include diverse representatives. A board can look appropriate to the public as representative; carry a good mix of talents and appeal to corporate constituencies at the same time. In selecting a board, however, the least important consideration is whether the CEO believes that he or she can manage the board. That consideration is far less important to other basic issues.
A passive board is a non-existent board. A demanding board that fulfills its obligation to question, push back, make demands and commit to real oversight is a board that is a value-add to a company. CEOs that are obsessed with managing board relationships and interaction to make their lives easier are a common occurrence today and is yet one more area that needs to be changed.
Corporate boards can suffer from a philosophy of self-congratulations. Too many board members are happy to join a club and make sure they stay in the club. One easy but inefficient way to do so is to reinforce each other as effective board members.
A confident board is one that commits to reflecting the real world in its boardroom. That means encouraging different perspectives, healthy debate, and diverse backgrounds that promote diverse viewpoints.
The status quo is just another fancy way of labeling stagnation. Companies have to be moving forward with new ideas, strategies and approaches.
A company’s clients and customers often reflect diverse backgrounds and share diverse perspectives. A corporate board that reflects this same diversity is responsive to this critical constituency.
A corporate board that reflects diversity of race, gender, age and experience also has more credibility within an organization. Senior management is more likely to embrace diversity in its own functions, as well as mid-level managers, when the corporate
board itself communicates and demonstrates a commitment to diversity.
CEOs gain much greater credibility and admiration from internal constituencies and outside observers when the CEO is seen as someone who embraces diversity in the corporate boardroom and demonstrates his or her own commitment to diversity in senior management. A diverse C-Suite provides an important platform from which to communicate, demonstrate and operate with confidence and real leadership.