diversity on boards of directors

Did you know your board is responsible for evaluating and strengthening implementation of the company’s diversity policy?

 

In the corporate governance guidelines of many countries, it is recommended that the board be responsible for ensuring relevant diversity in the company, not only on the board itself, but also within top management and at the levels below, to lay the foundation for good business performance as well as to create a diverse pipeline of candidates for senior leadership.

The task is not just to describe the policy and progress on achieving the objectives, but to ensure that the policy is a good one, with concrete, measurable goals and solid action plans.

When evaluating the policy and its implementation, the board should consider these areas, among others.

Does the diversity policy show

  • how the company will strengthen managements’ qualifications and competences to support future development
  • clear concrete plans for how the company will work actively to increase diversity
  • clear gender (and other diversity) targets at each management level

Two recent pieces of research show that there is room for improvement in how the boards manage this task, based on analysis of the diversity policies of some of the top companies.

In the UK, the FRC (Financial Reporting Council, which sets the UK Corporate Governance and Stewardship Codes) showed in its November 2020 Review of Corporate Governance Reporting that “A significant number of companies do not have any diversity targets for either the board or senior management, while a slightly lower number of companies have targets for both.” (Nov. 2020 Review, p. 16).

Similarly, our own recent study of gender diversity at the top listed companies in Denmark showed that the C25 companies are well on their way toward complying with the recommendations to set, publish and achieve gender targets for the board, while the situation looks much weaker for executive management teams.

Gender is only part of the picture, and more work needs to be done to evaluate how well boards are doing at helping ensure companies take action to improve other aspects of diversity (age, experience, ethnicity, other factors).  Boards have many responsibilities, but this is one area where boards should be more active, setting aside time to thoroughly review and discuss the company’s diversity policy, ensuring it is concrete, with measurable goals, clear action plans, and ambitious timelines.

If you’d like to discuss this topic further or get a copy of our full report on Gender Balance in the C25, please contact us at the email below. You can read the topline report on our website here.

reception@leadershipadvisorgroup.com  or   reception@onlineboardevaluations.com

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