The Impact of Board Diversity on Corporate Performance

The benefits of diversity on boards have been documented for years, and efforts to achieve greater representation of women and minorities in boardrooms are beginning to pay off. However, the impact of this diversity on corporate performance is not fully understood.

A popular argument is that a board with greater variety of ages and genders will have a greater knowledge base. This information will not be accessible to the men and women who are all the same. A board with greater diversity is expected to be more “cognitive” and will be able to consider different options when deciding the best way to move a business forward.

However, there are other factors to consider. The people who are considered to be minorities or tokens in a group may self-censor and avoid expressing opinions and opinions that are contrary to the majority. The board may not be able fully to take benefit of its cognitive diversity.

Additionally, although research in the field of academia suggests that demographic diversity can have a positive effect on board decisions, research suggests that it isn’t the only factor that is important. Other characteristics, such as board independence and educational qualifications, measured by the amount of years of education that go beyond a bachelor’s degree can be significant on performance.

In order to find new members, companies should be creative in searching for them. For instance, they should look into reaching out to businesses and universities to find potential candidates. They could also form task forces that are tasked with examining the areas where the most qualified candidates might not be easily identified. This is a much more effective way of increasing the diversity in a board than simply relying on external or internal consultants to recommend names.






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