Diversity in boardrooms has been a hot topic. Companies are being pressured from institutional investors and shareholders to increase their diversity. They are also under pressure to improve their diversity, as a diverse board can demonstrate that a company is forward-thinking and is beneficial to its the image of the brand. It can also help improve company culture by creating more inclusive, equal environment.
The evidence is inconsistent on the impact of board diversity. Many studies have shown positive effects, however others have demonstrated different effects. Gender diversity is, for example, related to the performance https://boardroomsales.com/ of a company when it comes to accounting returns however not the returns on markets. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.
In addition, it has been found that those who are considered minority groups or tokens within an organization tend to self-censor by not sharing their views and beliefs that are contrary to those of the majority of the group. This could prevent cognitive diversity from reaping the full benefits. Furthermore the age of directors can affect their decisions in the boardroom. Senior managers are less willing to alter their thinking and implement new ideas than younger managers. This is known as the “selection biased” effect. It is crucial to include young directors on a board and not rely solely on gender diversity.