Boards Poised for Change on Diversity Issues

Report addresses board makeup, diversity impediments and meeting efficiency.

One-third of directors who identified themselves as from an underrepresented group cited challenges in the boardroom, including dominated discussions, discounted opinions and a discouraging board culture, according to a report from the KPMG Board Leadership Center.
 
The report, Poised for Change: Boardroom Diversity Survey, queried more than 700 directors worldwide on topics such as boardroom blind spots, diversity of board composition and thinking, and ways to achieve better boardroom discussion. 
 
In support of the report’s claim that boardrooms are “poised for change,” 73% of respondents said they saw their boardroom’s composition changing in the next several years because of the retirement of a current director. However, other responses pointed to change that would be taking place for matters of diversity, with 28% citing pressure from investors to fill perceived gaps in diversity and 14% noting similar pressure from stakeholders.
 
We spoke with Susan Angele, senior advisor, board governance, at the KPMG Board Leadership Center, to dive deeper into the report’s findings. “Boards are looking to change their composition out of strategic necessity and remaining competitive. What that tells us is different skills are going to be needed going forward,” she says.
 
The report found that 42% of respondents are either moderately concerned (38%) or extremely concerned (4%) about boardroom blind spots and missed opportunities created by a group of directors lacking in diversity. Perhaps most concerning, of the 67 directors who identified as members of an underrepresented group, 33% were concerned as to whether their opinions are being properly heard or addressed in the boardroom, with reasons ranging from other board members tending to dominate the discussion to the board’s culture not being conducive to equal weighting of all voices.
 
“Board diversity continues to be critically important and needs to be prioritized if you’re going to enable a robust board discussion,” says Angele. ‘It’s just so important for board leadership to make sure that all voices are heard and the atmosphere is inclusive.”
 
The study showed a variety of reasons why diverse board candidates were difficult to identify, with 20% of respondents stating that their outside search firm has too narrow of a pipeline and 19% responding that the board has not identified a need for greater diversity. However, the largest segment of respondents (30%) cited lack of qualified candidates as the main obstacle to a diverse boardroom, an observation with which Angele starkly disagrees.
 
Citing organizations such as Latino Corporate Directors Association, Women Corporate Directors and African American Directors Forum, Angele says, “We know that there’s a deep and very talented pipeline. We also recognize that the survey indicates that there’s a false perception lingering that there’s a shortage of talent, and that’s unfortunate.” As best practices, she recommends that board leadership continue to be intentional about making board diversity a priority, while also pushing beyond their immediate social circles to find diverse talent.
 
The report also focused on the creation of more effective boardroom discussions, with 69% of directors replying that a board’s diversity in both composition and thinking is important to a company’s consideration of its role in society. Beyond the lens of diversity, a majority of respondents found their board’s approach to trust and transparency to be solid. According to the survey, 80% found that their directors freely question information presented to the board and 74% stated management welcomes open discussion. 
 
“There’s a lot of research out there that has shown that diversity of people, backgrounds, experience and skills help improve board decision-making,” says Angele. “Boards that include directors of diverse backgrounds and experience are just more effective.”
 
Check out the full report, Poised for Change? Boardroom Diversity Survey, at KPMG’s Board Leadership Center website.

Bill Hayes is managing editor of Directors & Boards

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