The Impact of Diversity on Board Performance

Many studies demonstrate a positive effect of diversity on board performance. A diverse group of individuals has different https://boardroomsales.com/evolution-of-corporate-governance/ experiences, perspectives and angles to consider problems, which can result in solutions that would otherwise be overlooked by a board that is more homogenous. This is especially the case for boards that have members from underrepresented groups. They will gain a better understanding of the preferences and cultures of these groups, which will assist them in serving these groups better as clients.

The diversity of backgrounds and experiences on a committee can boost morale and create trust. If board members feel like their opinions and experiences are being heard, they feel more committed to the success of the organization. It is important to track your board’s progress on promoting diversity, and identify any barriers.

Diversification can also be used to reduce risk. A recent study by Berger et al. found that more gender and age diversity on the board contributes to better risk management for operational risks and less exposure to market risk. It should be noted however, that the same study indicates that a large amount of diversity on the board may cause problems with cohesion as well as communication.

Furthermore, boards with a diverse makeup are more aware of the particular challenges faced by minority communities which can push them to act to promote moral conduct and social responsibility in their business. This is why it’s so important to continue to identify and recruit talented women or people of color and LGBTQ candidates for board positions.