Board Diversity is becoming more of a topic because of significant changes in society and global activism. Many companies have responded by increasing the number of minority and female directors. However, some companies are stepping beyond the limits of racial and gender diversity by making sure that they have cognitive diversity (the variety of skills experience, perspectives and experiences on issues that can improve decision-making).
A diverse board can be more effective than a homogenous one. Boards with a range of backgrounds and skills can tackle complicated issues in new ways and break free from the narrow thinking that causes groupthink.
This is the reason why investors and activists want to see more diverse and intelligent boards. Boards with different perspectives, experiences and perspectives can help them adapt to the massive changes happening in the world of society more efficiently and effectively – for example, the rapid increase in environmental, social and governance (ESG) issues.
Diverse boards are more likely to have cognitively diverse boards. This helps them identify problems more quickly and effectively. It is easier to address the issues when a range of perspectives are offered, and when members engage in debate and ask tough questions.
Having a diverse board is no panacea, though. Boards must be able to work together despite their differences, and this requires a chair who understands how to lead productive discussions and foster teamwork between people with very differing views and opinions. Otherwise, it could lead to internal conflict and a decline in productivity.