Diversity has several dimensions, so it matters in which way your board is “diverse.”  It can mean distinctions in the composition of directors by gender, race, age, skills, expertise, geographic and cultural experience, and – from our research – most significantly, diversity of thought. By this, we mean robust diversity in members' orientations to problem-solving.

The focus on regulatory requirements for diversity on corporate boards continues globally, despite select legal challenges on the move from principle-based push to policy-based mandates. 

While most attention has been on gender, it is taking a “twist.” For example, Malaysia adopted reforms in 2017 requiring large companies to have at least 30% of native Malaysian women directors on their boards and to disclose their diversity policy, target, and measures to reach the targets. Large companies were defined as those on the FTSA Bursa Malaysia Top 100 Index or with a market capitalization of RM2 billion or more at the start of the company’s financial year. While no sanctions were prescribed for failure to comply, the Prime Minister warned that companies failing to comply by 2018 would be named and shamed. The Securities Commission (SC) published statistics showing these reforms have increased women's representation in the top Malaysian publicly listed company from 16.6 percent to 23.7 in two years. Compared to other countries, female representation in Malaysia is higher than in Singapore and Hong Kong but lower than in the UK and Australia. 

In the U.S., the latest news comes from Hawaii, with a law under consideration that would require all companies located in the state to have a minimum of one female or non-binary director and one male or non-binary director before the end of 2023. Further, the requirement will expand to three of each category by 2025. The consideration here is about the “balance” of men and women. Violations of this law would include fines of $5000 a year and $500 for failure to submit the required diversity reporting to the state. In comparison, the legal mandates in California for board seats for women and underrepresented communities have been stymied after court rulings struck them down. The SEC is also challenged with litigation related to similar rules for companies listed on NASDAQ. 

The research on the positive impact of diversity on boards both expands and shows it comes from more than just gender balance. Diversity of thought  -- orientations and problem–solving styles–– correlate highly with ideation, quality decision-making, and corporate performance metrics.  

We research five key styles to ensure boards have diversity of thought at the table. 

Craft the Best Diversity for Your Board 

It’s time for boards to reframe their vision for board composition.

• Step One: Understand the potential of diversity.

• Step Two: Clarify the direction and needs to reach organizational goals.

• Step Three: Define what mix of diversity will optimize board performance.

•  Step Four: Describe the combination of factors that describe the ideal candidates for your specific board situation: What robust mix of skills, experience, perspectives, and thinking styles will create the most high-performing board? 

• Step Five: Understand how competent your board and executive team is in inclusion. It is one thing to create diversity. It can be another thing if a group needs to be more skilled in appreciating it. Inclusion is a skill. If needed, train and build this skill. 

• Step Six: Collaborate and align the board and executive management on a culture that understands the value of diversity and the leverage it provides for long-term success. 

Refinement in board composition is both growing and becoming more thoughtful. We provide board committees with assessment and profiling to help craft the ideal composition. Reach out if you seek support.