Numerous studies show that diversity has an impact positive on board performance. A diverse group of people has different perspectives, experiences and angles to consider a problem which can provide solutions that would otherwise be overlooked by a board that is more homogenous. This is particularly applicable to boards that have members from underrepresented groups. They will be able to understand the preferences and habits of these groups that can aid them in serving these groups as clients.
The presence of diverse backgrounds and experiences on a committee can increase morale and build trust. When board members feel that their voices and experiences are being heard they are more devoted to the success of the organization. This is why it’s crucial to monitor your board’s progress in promoting diversity and to identify obstacles that have to be resolved.
Diversification is also a method to lower risk. A recent study by Berger et al. The study found that a greater gender and age-related diversity on the board led to better risk management and an lowered risk of exposure to market risks. The study also shows that however, a high level diversity on the board may cause problems in cohesion and communication.
Finally, boards with diverse makeup are more aware of the particular challenges faced by those from underrepresented evolution of corporate governance communities and can prompt them into action to promote ethics and social responsibility in their operations. It is essential to continue to look for skilled women, people of diverse backgrounds, and LGBTQ candidates for board positions.