Why a Diverse Board Makes Good Business Sense

 

Written by:
Deborah Rosati, FCPA, FCA, ICD.D
Corporate Director, Co-founder & CEO, Women Get On Board

There is a lot of focus currently on the topic of diversity on boards. The underlying premise for diverse boards is no longer about good corporate citizenship but rather about contributing value to a business, and that makes good business sense.

Top 5 Business Reasons for Diverse Boards

  1. Improve corporate financial performance. Studies have shown that companies with more diversity on their board have had higher financial performance in three important measures: Return on Equity, Return on Sales, and Return on Invested Capital.
  2. Enhance decision-making quality. Diversity of thought comes from, race, gender and ethnicity and extends to age, culture, personality, skills/expertise, educational background and life experiences. More diversity on boards helps avoid ‘group-think’ and increases independence, which can enhance the quality of decision making on the board.
  3. Broaden networks to tap into for board renewal. Board members should ask themselves:
    ~Does the composition of the board represent the employee base, the customer base or business partners/competitors?
    ~What skills or perspectives do we need to broaden that is not currently on the board?
    ~What is our diversity mandate and what steps have we taken to increase board diversity? (For more information on diversity mandates, please read my related post: Are you advancing your Board Diversity mandate?)
  4. Foster innovation and creative thinking. Functionally diverse teams are more innovative, set clearer strategies, are more likely to react to competition, and are quicker to adapt to organizational changes.
  5. Enhance board effectiveness. Boards need to be accountable for their own actions and this begins with evaluating their own performance through annual board assessments.

If you are building a diverse board because it makes good business sense and are seeking qualified diverse board candidates, please email connect@womengetonboard.ca.

2 thoughts on “Why a Diverse Board Makes Good Business Sense

  1. SUSAN ANN BRAGA says:

    I have just proved through quantitative analysis that its not just the 3 financial measures you state, that are improved upon but also one of the most important, i.e. Returns on Assets.

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