Wall Street scandals, corporate malfeasance, the banking debacle and questionable business ethics have increasingly “forced companies and their leadership under a microscope”. Sarbanes- Oxley has brought pressure on how boards should be structured and how they operate, yet one area in corporate governance still suffers. Board diversity continues to be a challenge in the United States, lagging behind Europe.
Many boards reflect only one segment of the overall population (primarily white males), regardless of the companies’ constituency or customer base.
Some corporate governance experts believe that what is needed is more diversity ( in gender, ethnicity, age etc) which may then provide a broader base of opinions and input.
Joining host, Dennis McCuistion, to talk about this issue and solutions are key experts in the area of corporate governance:
- Renee Hornbaker: North Texas Chapter President, National Association of Corporate Directors
- Richard Leblanc, PhD: Author of Inside the Boardroom, Associate Professor, York University, Toronto Canada
- James Waters, JD: Partner, Haynes and Boone, LLP
Our experts give various views on diversity and how the U.S.companies measure against their European counterparts .In the U.S. board recruitment is often based on board members reaching out to people they already know and are comfortable with; often individuals with views and experiences similar to their own. Recruitment may also not take into consideration other values not reflected on the current board.
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Research indicates a more diverse board, with individuals from dissimilar backgrounds, race, age and sex, as well as nationality, enriches board decisions. Studies show that a diverse board structure increases corporate performance for the better.
Focusing on just one factor of diversity, as an example, women; the percentage of S&P 500 companies with at least one female director is just over 90%, yet 10% of these companies still do not have women directors and 28% have just one.
Women hold only 14% to 16% of the seats on audit, compensation and nominating committees. Even fewer women chair the board or audit committee, serve as financial experts, and only 12% of compensation committees have a female chair.
Women add a much needed divergent value- they are not afraid to question, challenge and are the first to fire the CEO if necessary! The Credit Suisse Research Institute recently reported that net income growth over the past six years averaged 14% for companies with women directors compared to 10% for those with no female board members. In addition, a report from Catalyst, a research group focused on women’s advancement to senior leadership, found that Fortune 500 companies with more women directors, on average, outperformed those with fewer women board members on a broad range of financial indicators (Forbes, Karyn L. Twaronite, Ernst & Young).
Some European countries have mandatory quotas for female representation on boards. While not a solution on the horizon for the U.S., some institutional investors are asking for greater gender and ethnic diversity.Our experts agree, that whether it be a for-profit or nonprofit board, both require good governance, experienced board members and diverse perspectives.
Our experts agree. Whether it be a for-profit or nonprofit board, both require good governance, experienced board members and diverse perspectives. The diversity issue is one that needs to be challenged.
Talking about things that matter… with people who care.
Niki N. McCuistion
Consultant and speaker:
On Engaging Employees, Organizational Culture, Governance and Strategic Planning
2208 – 12.28.2014