LEVERAGING DIVERSITY, EQUALITY, AND INCLUSION FOR BOARD EFFECTIVENESS

“A board is only as good as the quality of its directors. A well-composed board makes optimal decisions more consistently”

Introduction

Owing to the volatile business environment, boards must continuously reevaluate themselves, particularly in terms of strategy. This includes dealing with the changing face of work (a remote or hybrid workforce), employee activism, and digital transformations. Climate change, cybersecurity, data privacy, growing headline inflation rates, and other accelerating corporate developments are all potential threats. Customers’ ever-changing needs and expectations, as well as the need to build more robust supply chains, are among the concerns that companies need to address.

As a result, it is necessary to develop specialized ways of facilitating outstanding boardroom discussions.

The companies that would survive are those whose boards have the requisite mix of skills and experiences to meet the company’s needs today and in the future.

What is Diversity, Equality, and Inclusion (DEI)?

Diversity refers to the presence of people in a group who have varying skills, abilities, experience, age, gender, ethnicity, and religion. Equality is ensuring that practices are impartial, fair and that individuals are provided with equal opportunities. On the other hand, Inclusion is the practice of making people feel a sense of belonging in a group.

The Role of Boards in Promoting DEI

Boards play a critical role in creating an organization that prioritizes and invests in diversity, equality, and inclusion. The stakes are high, and it is pertinent that the tone is set at the top. The board’s support of DEI is important in a variety of ways, including executive recruitment, strategy development, resource allocation, and human capital management.

Undoubtedly, the quest to sustainably promote DEI in the boardroom would face fundamental barriers entrenched in decades of routine. Nonetheless, boards must take a deliberate, business-led approach to DEI.

Diversity as a Competitive Advantage

Diverse boards are more innovative because they are better at anticipating industry shifts, changes in consumer behaviour, and consumption patterns.

Additionally, diverse boards enjoy a multiplicity of ideas, insightful deliberations, and are less likely to suffer cognitive bias. 

These factors allow the company to achieve a competitive advantage.

The Business Case for DEI

Profitability remains one of the primary objectives for companies and their boards. Yet, in the last decade, research has shown that companies that embraced DEI initiatives were more profitable than their industry peers who did not. The regulatory environment for boards and indeed companies without DEI is also changing.

Arguments against the Business Case for DEI

In spite of the business case for DEI, other analysts have argued that DEI will not always improve the bottom line. Their argument is hinged on the fact that board appointments should not be made merely to fill a quota or to tick DEI boxes.

Markedly, the principle of DEI does not seek to downplay the fact that directors should be appointed based on their merits. Boards must ensure that their DEI frameworks are tailored to the company’s unique requirements. The board should consider which multifaceted differences are the most important and they must also create data-driven objectives for diverse talent representation.

Furthermore, nominations and appointments of directors should be guided by the skillset and experiences required to achieve the best outcomes for the company. 

Conclusion

An organizational culture that is based on equality and supports diversity and belonging must benefit all stakeholders, including the host communities where the company operates.

While the board’s role in promoting DEI in a company cannot be understated, all employees, not just the board, are responsible for the company’s culture shift.

This is how we can transform the world one person at a time.

References:

Sundiatu Dixon-Fyle; Vivian Hunt; Kevin Dolan; and Sara Prince. (2020). Diversity wins: How inclusion matters.  Available: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters. Last accessed 28th Mar 2022.

Alex Crimmins. (2022). Diversity and inclusion in the boardroom. Available: https://www.thecorporategovernanceinstitute.com/insights/guides/diversity-inclusion-in-the-boardroom/. Last accessed 28th Mar 2022.