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Board Directors Weigh in on Diversity

By Melissa J. Anderson

Recently Deloitte released the results of a survey [pdf] of 215 board directors in 12 countries in an attempt to gauge attitudes toward “board effectiveness, how boards are functioning and the changing roles of directors.” The study, “Director 360,” reveals key information on what board directors are thinking during the current economic uncertainty as well as the other issues that are causing them concern.

In the report, Deloitte points out the while the board directors surveyed were scattered around the world, in many cases, their concerns were the same. The study says, “An interesting result was the similarity in the opinions of directors despite the diversity of countries surveyed. This confirms the view that the challenges facing boards across the world tend to be more universal than diverse.”

One of the key issues the board directors discussed was the talent acquisition at the board and senior management levels. According to the survey, succession planning and recruitment potential during a time of increased liability are have some board directors worried. Additionally, the report said the majority of board directors consider diversity a key concern – in fact, 60% “agreed or strongly agreed that increasing diversity of directors was a focus of the board.”

Diversity and Recruitment

One key finding that the survey revealed is how differently directors view diversity across various regions of the globe. The study said:

“In countries such as Australia where regulators have introduced new rules aimed at increasing the representation of women on boards, diversity is largely seen to relate to gender. However, many of the directors interviewed were just as — or more — concerned with increasing the range of skills available in the boardroom, the countries from which directors originate, or the age of directors. Some even applied diversity to considering how to avoid a concentration of directors from a single university.”

Some of the more common tactics for promoting board diversity include identifying diversity gaps, monitoring progress, and seeking ways to increase workplace flexibility.

Boards are also keen to increase diversity within workforces so that they can develop a pipeline of diverse directors. But, while diversity was a key concern for 60% of board members, Deloitte’s study reveals that few are taking effective steps to improve it.

The report explains:

“A number said it wasn’t on the agenda as their companies had dominant founding shareholders who controlled board composition. Others simply felt it wasn’t the board’s responsibility. “This is not the board’s job,” said one. “The shareholders have the right to appoint board members.”

“Even though many directors emphasized the need for diverse skills on the board, including specialists in different fields, 18% of directors interviewed acknowledged that a greater mix of gender and ethnicity of directors was not on the radar. 21% remained neutral on the need for diversity.”

Finally, the study reports, while some companies may be coming along slowly with regards to board diversity, regulatory efforts are influencing some boards’ actions. Efforts in countries like France and Spain to increase boardroom gender diversity are causing some boards to pay more attention to the issue, and Deloitte anticipates that activities aimed at increasing diversity will ramp up in the coming months and years.

Other Key Findings

Compliance issues stemming from global responses to the economic crisis are also top of mind for many directors. As regulations on governance come into full force, directors are working to ensure companies continue to perform despite uncertainty around new rules.

Dan Konigsburg, Leader, Deloitte Global Center for Corporate Governance, explained, “Director 360 indicates that many directors are concerned that increased regulatory and compliance obligations in the wake of the global economic downturn have distracted them from focusing on performance and growth.”

But, despite what could be perceived as a challenge, Deloitte encouraged directors to take the view that the new regulations will encourage companies to step up their game.

He said, “That said, the economic downturn and market volatility appear to have forced directors to clarify their roles with respect to the role of management, and heightened directors’ focus on risk and liability. The good news is that boards expect to focus more on growth, performance, management succession, and mergers and acquisitions moving forward.”

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