Corporate Board Diversity is an expression used to describe the broad variety paperless board meetings of demographic characteristics, traits and abilities that can be found in a boardroom. This may include age, gender, educational background as well as professional experience, competencies such as philosophies, cultural identity such as race, sexual orientation and religion. This diversity will provide a useful range of perspectives and competencies that address the business needs and future requirements of the company.
A successful company needs an effective board capable of performing effectively. Therefore the composition of the board should be designed to meet this goal. Diversity is one way the board can attain this goal by fostering different ways of thinking, leadership and emotional styles that promote a greater awareness of the risk.
Investors are now increasingly demanding that directors be diverse. Some large institutional investment firms are actively removing board members who do not conform to their standards of gender and racial equity. CalPERS, the pension fund for state workers, sent letters in August 2017 to 504 companies that are listed on Russell 3000, demanding that they develop and implement a plan for diversity.
Certain states also pass laws that require companies to adopt measures to ensure board diversity. California for instance, requires that public companies with their headquarters in the state have at a minimum a certain number of female directors and directors of minority groups who are underrepresented on their boards by the year 2021. Additionally, companies are also required to disclose racial and ethnic diversity of their boards.