‘Overboarding’ focus as firms seek to boost diversity
Corporate boards are committed to increasing diversity: that’s the message from a new study showing that 81 percent of companies either have a diversity plan in place or intend to create one.
Just over half (54 percent) of companies polled say they already have a plan to boost board diversity, while a further 27 percent tell researchers this is something they intend to do in the future, according to the new report Impossible until it’s done published by Diligent and the NYSE.
The report authors note, however, that almost half of companies surveyed (45 percent) lack any specific timeframe for meeting diversity goals. But when a timeframe is set, it is ambitious: 35 percent of companies have set a one to three-year period in which to meet their diversity goals.
The most widely adopted approach companies are taking to promote board refreshment is limiting the number of boards a director can sit on (17 percent).
This brings a new focus on the concept of overboarding – a growing issue for investors in recent years. Although the Diligent and NYSE study doesn’t provide numbers when talking about limiting the number of boards a director can sit on, both ISS and Glass Lewis have tightened their stance on this in recent years.
A further 14 percent of companies surveyed have introduced board member age limits, while 11 percent have added more seats to their boards, making room for new, more diverse directors to join.
Gender-specific diversity goals are most common, cited by 28 percent of companies with a board diversity strategy in place, followed by directors’ skillsets (25 percent) and race/ethnicity (22 percent).
The report authors also gathered quotes from board directors on diversity:
- ‘These strategies are good. [But] the reality is that boards are looking for people who have previous board experience. This criterion is a conundrum since historically board members haven’t been diverse. So the same person of color or woman is recycled constantly, essentially closing the ecosystem for new people of color entrants’
- ‘I embrace the concepts of sustainability and ESG but, other than very large name-brand companies, I continue to be concerned that most boards mostly give lip service to the concepts and [don’t] appreciate the long-term value of [them], including the diversity element’
- ‘Strategies around board diversity too often focus on only gender and ethnicity – to the detriment of skills – to meet check-the-box ratings’
- ‘Diversity improves the strategies companies have, and it is critical that it is embraced and enhanced from the highest echelons of business leadership.’