Welcome to the fourth part of our blog series based on The Chartered Governance Institute podcast Kerry Round took part in a few weeks ago.
This blog will focus on the importance of diversity and whether it's necessary on a board.
Diversity is a hot topic for all listed companies, but that's not to say non-listed public and private sector organisations should gloss over it.
Diversity isn't solely limited to gender and ethnicity and whilst these and other protected characteristics are valuable and enlightening to Boards, I can’t help thinking that until those decision makers really grasp the benefits to their their organisations of the wider concept of diversity, that the journey to diverse boards will continue to be like climbing a mountain with a piano on your back.
Boards should reflect their stakeholders and apply serious thought to make that happen. The Code tells us that board appointments should be "based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths."
The benefits of a diverse board are:
- Access to a wider pool of talent.
- Improved decision-making.
- Better customer insight.
- Stronger corporate reputation.
- Improved corporate governance.
- Enhancement of investor relations.
It's not just the Code that tells us the boards of listed companies should be diverse; the FCA's Disclosure and Transparency Rules tell us that a company must publish a Corporate Governance Statement and disclose (amongst other items) the company's diversity policy.
Institutional investors say they'll do their talking with their voting if they're not happy with the diversity on boards. And, let's not forget; we have the FTSE Women in Leaders and the Parker Review both bringing these matters to the fore. It's a serious topic, and to address it is a very determined move away from locker room appointments.
So how are we going to achieve a truly diverse board? Look within your own organisation would be a start. What opportunities do you have within your own organisation for development and ultimately leadership? How wide are you casting your net when it comes to making those top spot appointments and who has the power to make those decisions. We’d like to say that there are no more locker room appointments but really .. we do know these are still happening. I’m a great believe that understanding who your stakeholders are really shines a light on the optimum Board composition for you. Know who they are and be clear how you represent all of them on your Boards.
So, in conclusion, to go back to the question we started this blog with, the answer is 'false'. Governance industry rules and regulations are pretty clear that organisations must be transparent and actively pursue a diverse board. And, yes, compliance is one thing, but you cannot overlook the benefits a diverse board brings to the table. Diversity makes business sense. Lets not still be having this conversation when our children are the ones making these decisions!
About Kerry Round and Round Governance Services
With 15 years of experience as a governance practitioner in listed, quoted and large private organisational structures under her belt, Kerry recognised a better way of doing things. She established Round Governance Services to make governance more accessible and easier to understand. She also wants to move the role of governance into the 21st century and create a business that supports flexible and agile working. Here's their company purpose: "as a socially-minded business, our purpose is to practise good governance for ourselves, our clients who trust and depend on us, and the communities who rely on us all. Our tailored and proactive approach to work is fundamental in achieving this."
Find out more about Round Governance Services
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Kerry discusses this subject in more detail in the latest episode of the Engage Governance podcast ‘Understanding IPO governance'
