The Competitive Advantages of Diverse Boards

January 5th, 2012 | By

In recent years, diversity in the boardroom has gained prominence on international governance agendas. Many corporate directors, C-suite executives and shareholders recognize the unique competitive advantages that diverse boards provide across a wide range of competencies.

Despite some advances incorporating women and minorities into boardrooms, the United States still has work to do when compared with the rest of the world. According to NACD’s 2011 Public Company Governance Survey, 67.5 percent of the nearly 1,300 U.S.-based public company directors polled saw no change in the number of female directors added to their boards in the last three years.

At least 10 European countries, including France, Norway and Spain, have imposed quotas to ensure that women make up, in some cases, at least 40 percent of corporate board seats. A new study finds that among those nations, France is on track to soon surpass the U.S. when it comes to cracking the proverbial glass ceiling. France’s leap from only 7.2% of board seats held by women in 2004 to 20.1 percent (compared to 20.8 at U.S.-based Fortune 200 companies) was largely attributed to a quota law passed in 2010. While the U.S. may not need to adopt a quota system, all boards should proactively work to diversify the composition of their boards to better prepare themselves to meet future economic challenges.

To keep up with the complex and rigorous demands facing modern boardrooms, U.S. companies should remain aware of the competitive advantages of a board that draws directors from a broad talent pool rather than one whose directors’ skill sets, experiences and competencies may be too similar.

Further complicating the issue, a recent Bloomberg article discusses the impact these latest diversity quotas may have on U.S. organizations, noting that “European companies may soon be looking for hundreds of female directors,” leaving a vacuum for top talent in the United States. According to the article, “U.S. women executives said they are eager to take their experience overseas,” leaving boards of U.S.-based companies in the wake.

As a steward of exemplary board leadership and exceptional corporate governance, NACD believes that diversity in the boardroom should be viewed as a business imperative. With its Board Composition Planning Programs, NACD offers a wealth of resources to ensure that a company’s board composition is appropriately aligned with its strategic needs.

NACD defines diversity broadly, and our programs and resources encourage director diversity from a cognitive perspective. The bottom line is that cognitive diversity in the boardroom translates to intellectual diversity. With broad diversity of director and board composition comes expanded and enriched skill sets and experiences that will likely benefit companies that want to stay ahead of the curve.

As we look forward to 2012, boards should be prepared to implement new strategies that outline the essential criteria which they will look for in succession planning, taking into account how the composition of their boardroom meets the strategic needs of the company in the years ahead.

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One Response to “The Competitive Advantages of Diverse Boards”

  1. Excellent brief! If US women are globally prepared, opportunities abound to present their credentials to international corporations. I especially like your comment, “The bottom line is that cognitive diversity in the boardroom translates to intellectual diversity.” And that is what will translate into performance progress for companies.

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