Introduction to Boardroom Diversity
In a rapidly evolving global business landscape, boardroom diversity stands as a powerful asset for corporations. With a unique blend of backgrounds, experiences, and perspectives, a diverse board fosters an environment conducive to innovation and transformative thinking. Recent surveys conducted by the KPMG Board Leadership Center reveal key insights into directors' views on this subject, highlighting the need for a rethinking of board compositions.
The Demand for Change in Board Composition
Many directors have shown an appetite for change. According to the 2021 KPMG Board Leadership Center survey, about 55 percent of Singapore directors and 59 percent of directors globally expressed a desire for moderate changes to their boards, if given a chance to start anew. A slim percentage (5 percent in Singapore and 4 percent globally) indicated that their boards would be completely different, underscoring the growing need for boardroom diversity.
The drive for change emanates from a perception of missed opportunities and blind spots due to a lack of diverse views in the boardroom. Directors are gradually acknowledging the importance of diversity in enabling companies to meet evolving societal expectations.
Boardroom Diversity: Addressing Blind Spots and Missed Opportunities
Globally, 11 percent of directors confessed they were extremely concerned about the impact of limited diverse views on insightful discussions and the identification of blind spots. This concern is even more pronounced among Singaporean directors, with over 60 percent expressing concern or extreme concern about the lack of diversity in their boardrooms.
Furthermore, 55 percent of respondents see their board's diversity - in terms of composition and thinking - as critical to their company's role in society. Yet, impediments persist. These range from a perceived lack of qualified candidates to a failure to identify the need for greater diversity, and a tendency to recruit from familiar social and business circles.
The Journey Towards Diverse Boards: Key Impediments
Recruiting directors from diverse backgrounds is, unfortunately, still perceived as challenging. Almost half of the respondents saw the lack of qualified candidates as a key barrier. Close to one-third noted that the failure of boards to identify the need for greater diversity was a major impediment. A sizeable number of respondents also blamed the tendency of CEOs or boards to recruit within their existing social or business circles.
Leveraging Boardroom Diversity for Robust Discussions
Interestingly, while most directors in Singapore believe they can freely question information presented to them, and most feel management welcomes open discussions, there is still room for improvement. One in ten directors describe strategic issue discussions as inconsistent or perfunctory. Additionally, nearly a third felt their board leadership was only somewhat effective in eliciting views, ideas, and concerns from all directors.
Conclusion: Embracing Boardroom Diversity
Change is imminent. A growing number of directors are willing to rethink their board’s composition, recognizing the value of diverse perspectives in shaping effective strategies and detecting potential blind spots. The journey towards achieving boardroom diversity may be fraught with obstacles, but the endgame of creating an inclusive, forward-thinking corporate environment is well worth the effort. It's time to harness the potential of diversity and steer corporations towards a future that is rich in innovation, resilience, and success.
Our Directors’ Institute- World Council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.