Submitted by EveTahmincioglu on Fri, 10/11/2019 - 09:31

Don’t just focus on filling quotas

Some lawmakers, regulators and shareholders are actively encouraging boards to recruit diverse candidates by setting quotas for diverse hires; and California’s recently passed law mandating gender diversity is just the most recent example. 

But are such moves really helping companies in desperate need of new and unique voices in the boardroom? While increasing gender diversity on boards is of critical importance, the use of quotas and mandates may not necessarily achieve intended goals. 

The newly appointed women could be from the same industry, the same area, be of similar age, have attended the same schools and be of the same political affiliation as the other board members, resulting in effectively very little differentiation in thinking from the incumbent directors.  Also, if a woman is added to a board only in order to “check the box”, depending on the existing board members, the new woman may or may not be heard or respected.  Even worse, once the quota is met a company may not continue to search for additional diverse board members.    

If companies and boards really want different perspectives when thinking about strategy, they need to look at several elements that might produce diversity of thought and not just focus on filling a quota.  Five often overlooked types of diversity are described below and should not be ignored when hiring new directors.

Professional Experience:  How many members of your board have led a team through adversity?  In order to create and encourage a board culture that can successfully utilize diversity of thought it is important to have and recruit some board members who have been successful leaders – not just managers but actual leaders.  These leaders will likely have learned some key leadership traits such as “hire people better than yourself” and “hire people that will supplement your strengths” and are more likely to welcome and appreciate different perspectives.  Such board members know that there is a benefit in hearing multiple perspectives and that those additional perspectives can enhance the decision-making process, not hinder it. 

Age:  How savvy is your board with social media?  How do you think Snapchat can help your company?  How important is paternity leave for your younger recruits?  Not sure?  A millennial on your board is going to have a different perspective than your baby boomers on numerous issues that are important to your company.  This will be especially critical as millennials make up a greater percentage of consumers overall as they age.

Politics:  Is everyone on your board the same political persuasion?  No one ever speaks about a need for political diversity because let’s face it, sitting around a table with a group of people with diverse political views can be pretty contentious.  But that’s only if you’re trying to make laws or trying to maintain a pleasant dinner conversation.  If you’re trying to understand your customers and employees, whom come may hold a variety of perspectives, you need to have diverse perspectives at the decision-making table.

Life Experience:  Does everyone on your board belong to the same social peer group?  Do they all have similar education credentials?  Someone who grew up in a small town in the Midwest and attended a public university may have a different approach to solving a problem than someone who grew up in a metropolitan area on one of the coasts and attended an Ivy League school.  Not only that, successful companies do not target a single type of customer, and it would behoove boards to make sure they are responsive to their company’s diverse customer base.

Industry:  Does everyone on your board have experience in the same industry?  A technology company eventually needs to market and sell their product to consumers, likewise a retail company needs help maximizing their use of technology.  A restaurant company needs to understand real estate and a REIT needs to understand the business of their tenants.  This cross-disciplinary reality is true for every industry.  Having an outsider bring a new perspective to a board can unlock value for shareholders – this is something activists are keenly aware of already.  When looking to hire new board members, a lack of industry experience may not always be a negative factor and could, in fact, be a huge benefit to the board.

Clearly, meeting diversity quotas should not result in a company making a hire to “check the box”.  Instead, companies should look at meeting quotas as an opportunity to truly increase the quality of their board meetings, and shareholder value, by increasing the diversity, and therefore the robustness, of the board’s decision-making process. 

Companies must evaluate the entire package a potential board member provides, including along the dimensions noted above, and make sure that the new hire will bring a strong, unique, and valuable voice to the board. Only by hiring a truly diverse candidate will companies realize the benefits of having a diversity of thought on their boards leading to better results for shareholders.

Marran Ogilvie is a director for Four Corners Property Trust, Ferro Corporation, Evolution Petroleum Corporation and Bemis Company. Evan Dunn is the associate general counsel of Four Corners Property Trust.