Beyond Optics: Why Board Diversity Really Matters

by Lucy P. Marcus for The Huffington Post, January 4th, 2011.

Discussions around diversity in the board room often focus on gender, and indeed women are severely under-represented on boards. Importantly, though, the lack of women on boards is a reflection of a wider problem: it is one of color, age, international perspective, and more.

A lack of diversity is not simply a problem of “optics”. It looks skewed not to have a diverse board, but just because in the modern world it looks odd, does it make a difference in real economic terms? Does it actually affect the bottom line? To my mind the answer is a resounding yes. We do not need diversity for diversity’s sake, but because board diversity contributes to the profitability of the business.

There is a fundamental economic reason why diversity is important: diversity of thought, experience, knowledge, understanding, perspective and age means that a board is more capable of seeing and understand risks and coming up with robust solutions to address them. Businesses led by diverse boards that reflect the whole breadth of their stakeholders and their business environment will be more successful. They are more in touch with their customers’ demands, their investors’ expectations, their staff’s concerns, and they have a forum inside the board room where these different perspectives come together and successful future proofing business strategies can be devised.

An argument I have heard against actively seeking diversity on the board is a fear that too much diversity and independence of thought can be damaging to the cohesion of the board. Yet, for healthy boards with capable chairs the very opposite is true. Board cohesion is vital, and everyone needs to be moving in the same direction, but within that agreed direction, the modern board requires open, constructive, and dynamic discussion, rooted in respect and regard for the people around the table. (continue reading… )

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