waytofly

The advantages of diversity on boards are well-documented and efforts to create more representation of minorities and gender in boardrooms are beginning pay off. However the impact evolution of corporate governance of this diversity on the performance of corporations is not fully understood.

One popular argument is that a greater diversity of demographics enhances the knowledge base of a board and provides it with knowledge that isn’t available to a homogeneous set of men or women. A board with more diversity is expected to be more “cognitive” and will explore more options when deciding on how to move a company forward.

There are other factors that are at play. The people who are considered to be to be minorities or tokens within an organization may self-censor and refuse to express opinions and beliefs that contradict the majority. The board might not be able to fully take advantage of its cognitive diversity.

Furthermore, while academic research suggests that demographic diversity has a positive impact on board decisions, research shows that it’s not the only factor to consider. Other aspects, like board member independence and educational qualifications as measured by the number of years of education that have been completed beyond a bachelor’s degree can influence performance.

Companies looking to enhance their boardroom composition must be innovative in the search for new members. For instance, companies should think about reaching out to business programs and universities to find potential candidates. They could also form task teams that will investigate the areas in which the most promising candidates might not be easily identified. This is a much more effective method of increasing diversity instead of relying solely on consultants whether external or internal.