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Akatlar Mah. Uğur Mumcu Cad. Mustafa Kemal Kül. Mer. Girişi, Beşiktaş, İstanbul

The Impact of Board Diversity on Corporate Performance

The benefits of diversity on boards have been documented for years, and efforts to achieve greater representation of minority and gender in boardrooms are beginning pay off. The impact of diversity on the performance of companies remains largely unknown.

A popular argument is that a board comprised of a greater variety of genders and ages will have a wider knowledge base. This information would not be available to the men and women who are all the same. In the same way an organization that is more diverse is expected to have more “cognitive variety” and consider more options in deciding how to move the company forward than one with less diversity.

There are other elements that are at play. People who are considered to be minorities or tokens in groups might self-censor, refusing to speaking out about beliefs and opinions which are in opposition to the majority. As a result, the board may not be able take full benefit of the diversity of thought it has incorporated into its composition.

Furthermore, even though research shows that demographic diversity can be beneficial to board decisions, it also suggests that this isn’t the only thing to consider. Other attributes such as board independence and educational qualifications, measured by amount of years of education that go beyond a bachelor’s degree can have a significant impact on performance.

Companies looking to enhance their boardroom composition must be innovative in their search for new members. For instance, they could look into reaching out to businesses and universities to find potential candidates. They could also set up task forces that are tasked with examining the areas where the most qualified candidates aren’t readily apparent. This is a more effective way of increasing the diversity of the boardroom than relying on external or internal consultants to suggest names.