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The Impact of Board Diversity on Corporate Performance

The benefits of diversity on boards are well-documented and efforts to achieve greater representation of women and minorities in boardrooms are beginning to pay off. However the impact of the diversity of corporate performance is not yet fully understood.

One of the most common arguments is that a greater diversity of demographics expands a board’s knowledge base, providing hop over to this website it with information which would be lacking from a homogeneous group of men or women. A board with more diversity is expected to be more “cognitive” and explore more options when deciding on the best way to move a business forward.

There are other factors to consider. Individuals who are deemed minorities or tokens within groups can self-censor, avoiding expressing beliefs and opinions that are contrary to the majority. This means that the board might not be able take full advantage of the cognitive diversity it has included in its composition.

Furthermore, while research in the field of academia suggests that demographic diversity has a positive impact on board decisions, research shows that it’s not the only factor that matters. Other factors, like the independence of board members and their educational qualifications as measured by the amount of years of education that are beyond a bachelor’s level could significantly impact performance.

Companies looking to enhance their boardroom composition must be innovative in the search for new members. For instance, companies could consider contacting businesses and universities to find potential candidates. They could also create task forces to investigate the areas in which the most promising candidates may not be visible. This is a more efficient method to increase diversity than relying solely on consultants who are either external or internal.