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The Benefits of Board Diversity

Prejudice and discrimination should have no role in the corporate world. The opportunity to serve on corporate boards should not be the exclusive privilege of any one particular group. In the United States, however, only 16.9% of Fortune 500 board seats are held by women. Globally, women hold only 11% of board seats at the world’s largest companies.

Diversity raises basic questions of fairness, but also presents important business benefits. A diverse board can best understand the complex make-up of a company’s customer base and their needs. A company that ignores the skills of women and minorities fails to take advantage of the full range of management and directorial resources available to it.

The Alliance for Board Diversity argues that women and minorities on corporate boards with diverse talents, backgrounds, and perspectives can help corporate leaders make better decisions. Their inclusion can also enhance public trust by demonstrating the company’s commitment to the interests of all stakeholders.

One survey of 1,500 global business leaders, across all industries, revealed that a majority of men and women recognize that gender diversity is a performance driver for companies, although actual implementation of gender-diversity remains limited. (Source: McKinsey & Co.). 

The U.S. Outlook

Gender diversity is now a legal requirement in a growing number of European jurisdictions. According to a recent global survey of women on corporate boards, Norway, Sweden and Finland lead the world in terms of female representation on corporate boards, with 36.1%, 27% and 26.8% representation, respectively. Over half of French boards, and a third of German boards, have at least three female directors (Source: GMI Ratings). 

In the United States, where board diversity is driven by voluntary measures, there have been advances, but the figures are still disheartening. As of 2013, among the Fortune 500:

  • Board seats held by women: 16.9%
  • Board seats held by women of color: 3.3%
  • Female CEOs: 4% 
  • Female executive officers: 14.6%

On the positive side, at 91 Fortune 500 companies, the percentage of female directors was 25% or more, including Estée Lauder (46.7%), Procter & Gamble (45.5%), Xerox (40%) and the Walt Disney Company (40%).  

Source: Catalyst

Japan Lags Behind

According to GMI Ratings, Japan ranks lowest in the world on board diversity, where only 1.1% of corporate directors are female. Women are also rare among top management of publicly traded Japanese firms. In response, Japanese prime minister Shinzo Abe has recently announced aggressive goals to advance women in business.

A survey of more than 10,000 working men and women in Japan found that 44% of respondents believed that diversity leads to increased business performance.