There is considerable discussion about diversity among directors. How does a board make sure that diverse members are not regarded as placeholders but seen as important contributors to the board, equal in value and importance to all other directors?
Strong boards are built upon a diversity of experience, viewpoints, and perspectives.
Diversity comes in a range of backgrounds: minorities, gender diversity, and, critically,
diversity of thought. Gender diversity is currently being mandated in the EU; for example, Harvard Business Review’s recent article cites mandatory quotas of 25% to 40% for female board member representation in Germany, France, Belgium, Iceland, and Italy, with a recommended female diversity target of 25% for the UK. America’s free market has not embraced government mandates, but we have seen an increase to 18.7% gender diversity in the S&P 500 (19.7% in the Fortune 500). Institutional shareholders are urging more diversity, thus boards must be able to communicate clearly how they are addressing diversity of thought and perspective and may want to consider proactively adding gender and minority diversity as part of their profile for board refreshment. However, it is essential to bring on qualified members to avoid the
label of “placeholders.” -B
It’s important to our board that each member be grounded in as many important governance areas as possible and so we’ve started asking members to sit in and listen to committee meetings where they are not an active member. Some directors are beginning to grumble that this is asking too much of their time, and feel additional compensation should, at a minimum be afforded. Have you had experience with this and could you offer any recommendations?
I recommend that you have an environment that is open and allows members to sit in on other committees where there is an interest and desire. I think you go too far in asking members to listen in on all of the committees. The reason I do not support this is that it undermines the primary responsibility of the committee if non committee members are sitting in because … inevitably non committee members opine and participate. Expecting board members to sit mutely on a committee and not engage is not realistic in my view. Additionally, the purpose of having committees is for the board to be efficient and allow a subset of the board to be deeply engaged and “own” an important responsibility on behalf of the whole board and report back out. I think your colleagues are right to grumble. –B
Have a dilemma or issue with your board? Ask Betsy a question.