Debating Board Diversity: Part 2 – From Thought to Culture

Where is the debate on board diversity heading?  In Part 1, we took issue with the current (albeit understandable) focus on gender representation, which we argued risks narrowing the discussion. In this concluding article, we offer some other perspectives on how to bring diversity into the boardroom.

To begin with, cognitive diversity is still under-appreciated in the boardroom, partly because we don’t know how to value it, and partly because we lack established models. Progressive boards might use relevant psychometric assessments and team evaluations, but these are a minority. Yet we know the risks of “group think” (even if the group reflects gender equality).

Mike Myatt in an article from Forbes Magazine talks of the top 10 reasons in favour of board diversity.  Four of these relate to Diversity of Thought, whilst three others relate to the moral imperative. Boardroom discussions often centre on the imperative rather than the thought, but if we hold onto the idea that a board’s key responsibility is to fully explore all ideas and options before it, then “thought” has to be the lead dynamic.

If the goal is to encourage diversity of boardroom thinking, this should include the ability to at least consider alternative (even opposing) perspectives and acknowledge the views of groups who may not actually be in the room.  Although an ideal outcome might be to have those groups represented in person on the board, rather than having to think for them, it’s not very realistic.

In practical terms, boards cannot hope to be truly representative of our society in terms of simple numerical composition.

Assuming the ASX can achieve their goal of gender balance on all public company boards (an admirable aim that we support in principle in conjunction with appointments on merit and not via quotas), do they then move on to set policy targets for race, age, disability, creed, sexual orientation, football club allegiance, nationality, political persuasion… ???

Let’s consider a different but effective approach.

When ESG (environment, social and governance), CSR (corporate & social responsibility) and triple-bottom line accounting issues emerged, major investors and superannuation funds, prompted by shareholder and member activism, began asking deeper questions of the companies they invested in. Likewise, we advocate that institutional investors need to ask a wider range of questions on diversity, beyond gender, and across company hiring policies, leadership development programs, senior appointment processes, board selection criteria and even community and customer engagement.

If the investors do not like what they hear, then it is incumbent upon them to help influence the board’s thinking, and to instil the right leadership culture, which in turn creates the appropriate environmental conditions for diversity to take hold and flourish.

In the end, culture precedes thought precedes action.

Posted by Dale Simpson (with assistance from Rory Manchee)

If your board or senior management team needs help with developing a leadership diversity program, please contact Bravo Consulting about how we can help you achieve your goals.

BonnieSue Nevin

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