INCREASED SCRUTINY FROM INVESTORS, REGULATORS, THE MEDIA, AND other stakeholders is pressuring public companies to refresh their boards of directors to achieve greater diversity. Shareholders have sued at least a dozen public company boards since mid-2020, accusing them of failing to diversify. From July 2020 through June 2021, investment manager Black-Rock voted against more than 1,800 directors at close to 1,000 companies for insufficient action to increase board diversity. Proxy advisory firm Institutional Shareholder Services now recommends withholding votes from, or voting against, directors with nominating or governance roles on boards that don’t have at least one non-White director and at least one woman. The Nasdaq exchange, with the approval of the U.S. Securities and Exchange Commission, will soon require listed companies to have at least two demographically diverse directors (or explain why they don’t).
Diverse boards representing a broader range of experience may be better able to quickly navigate volatile business environments and unexpected disruptions, such as a global pandemic. Recent data from BoardReady, a nonprofit group that promotes corporate diversity, found a positive correlation between the diversity of S&P 500 boards and revenue growth during the pandemic.
This story is from the Fall 2022 edition of MIT Sloan Management Review.
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This story is from the Fall 2022 edition of MIT Sloan Management Review.
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