Diversity in boardrooms has become an ongoing topic. Shareholders and institutional investors are increasing the pressure on companies to improve their diversity. A diverse board can show that a business is progressive, which will help to improve the image of the brand. It can also enhance the culture of the company by creating a more open, equal and inclusive environment.
However, evidence on the impact of board diversity is mixed. Many studies have found positive results, but other studies have proven that different types of diversity could have distinct impact. Diversity in gender is, for instance, associated with the performance of a company in accounting returns however, not returns from markets. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.
Additionally it has been observed that people who are minority groups or tokens within groups tend to self-censor by not sharing their beliefs and opinions if they contradict those of the majority of the group. This can prevent the full benefits of cognitive diversity from being realized. The age of directors can also influence the way they make decisions in a boardroom. Senior managers https://boardroomsales.com/setting-strong-goals-for-a-board-of-directors/ are less likely to embrace new ideas and changes than younger managers. This is known as the “selection biased” effect. This is why it’s vital to include young directors in the board and not only focus on gender diversity.