Key highlights
- Gender diversity is crucial for corporate boards to stay competitive and drive growth.
- A lack of gender diversity in corporate boards is a missed opportunity for companies to improve financial performance and innovation.
- To promote gender diversity, companies can set clear goals, review recruitment processes, develop a pipeline of female talent, foster an inclusive culture, hold leadership accountable, and celebrate achievements.
Diversity has long been a buzzword in the corporate world, yet its importance cannot be overstated. In a rapidly changing world, having a diverse mix of perspectives, backgrounds, and experiences is essential for businesses to stay competitive and drive growth. Diversity is a means of creating value. One of the key areas where diversity, especially gender diversity is needed, today, is in corporate boards.
Corporate boards are the governing bodies that oversee a company’s strategy, risk management, and financial performance. With such critical responsibilities, boards must reflect the diversity of the customers, employees, and communities they serve. This is particularly relevant in light of International Women’s Day, which serves as a reminder of the need for gender equality in all aspects of life, including in the workplace.
Despite progress in recent years, women remain underrepresented in corporate boardrooms. According to a report by the International Labour Organisation (ILO), women occupy just under 25 per cent of board seats globally. This lack of gender diversity is a missed opportunity for companies, as research has shown that gender-diverse boards are associated with better financial performance and increased innovation.
The thinking is that having women in leadership positions would help to tackle biases, curtail gender-based violence and narrow the gender pay gap. When women occupy a significant portion of board seats, they can use their influence to promote policies that support gender equality, such as flexible work arrangements and equal pay for equal work.
Of course, in addition to gender diversity, corporate boards need to be diverse in terms of race, ethnicity, and other characteristics as well. A diverse board can bring a wide range of perspectives to decision-making, which can lead to better and more innovative solutions. This diversity can also help companies understand and connect with diverse customers and communities, which is essential for long-term success.
There are many tangible benefits of improved gender diversity on corporate boards. For instance, gender diversity brings different perspectives and experiences to the table, which can lead to more informed and well-rounded decision-making. Research has shown that diverse groups are more innovative and better able to identify risks and opportunities than homogenous groups.
In addition, studies have found that companies with more gender-diverse boards tend to perform better financially. This is because a diverse board is better equipped to understand the needs and preferences of a diverse customer base, which can lead to improved business strategies and outcomes.
A gender-diverse board also sends a message that the organisation values diversity and is committed to creating a culture of inclusion. This can attract a wider pool of talent and help the company to recruit and retain top performers.
Furthermore, companies that are seen to be committed to gender diversity and inclusion are often viewed more positively by customers, employees, and other stakeholders. This can lead to enhanced brand reputation and increased customer loyalty.
The reality however is that many companies have been slow to embrace diversity in their boards, despite the benefits. To promote diversity in corporate boards, companies, governments, and society as a whole must work in concert.
I will be the first to admit that improving gender diversity on corporate boards cannot happen overnight. It will remain, essentially, an ongoing and important process that requires a variety of approaches. Organisations that are keen to boost their ranking in this regard can adopt different combinations of the following strategies:
Set clear goals: One of the most effective ways to improve gender diversity on corporate boards is by setting clear goals for representation. This should be accompanied by strategies and initiatives designed to achieve these goals. For example, a company might set a target of 50 per cent female representation on its board by a specific date and implement specific recruitment strategies to achieve this goal.
Review recruitment processes: Companies should review their recruitment processes to ensure that they are attracting a diverse range of candidates. This includes examining where job postings are advertised, how potential candidates are sourced, and how the interview process is conducted.
Develop a pipeline of female talent: Organisations should work to develop a pipeline of female talent, which involves identifying and developing promising women in the company for leadership positions. This can be done through mentorship programs, leadership training, and other development initiatives.
Foster an inclusive culture: another strategy that can adopt is to foster an inclusive culture that values diversity and provides opportunities for all employees to contribute and grow. This can be achieved through initiatives such as employee resource groups, training on unconscious bias, and regular diversity and inclusion assessments.
Hold leadership accountable: Companies should hold their leadership accountable for achieving gender diversity goals. This involves setting expectations and providing regular updates on progress, and tying executive compensation to diversity goals.
Celebrate achievements: in addition, companies should celebrate achievements in gender diversity, both internally and externally. This can include highlighting success stories of female leaders, recognizing individuals who have contributed to diversity and inclusion initiatives, and publicly acknowledging the progress made towards gender diversity goals.
Improving gender diversity on corporate boards requires a concerted effort and a variety of approaches. By setting clear goals, reviewing recruitment processes, developing a pipeline of female talent, fostering an inclusive culture, holding leaders accountable, and celebrating achievements, companies can work towards achieving gender parity and promoting a more diverse and inclusive workplace.
To achieve these benefits, companies should set clear goals for representation, review recruitment processes, develop a pipeline of female talent, foster an inclusive culture, hold leadership accountable, and celebrate achievements. By implementing these strategies and initiatives, companies can work towards achieving gender parity and promoting a more diverse and inclusive workplace.
Now, there are many different codes and policies that organisations and institutions may adopt to promote diversity, equity and inclusion (DEI). One such code is the National Code of Corporate Governance (NCCG) which was first introduced by the Financial Reporting Council (FRC) in 2018 and updated in 2021.
The NCCG seeks to institutionalise corporate governance best practices in Nigerian companies and to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment.
In terms of diversity, the NCCG requires companies to have a diverse board of directors that reflects the diversity of the communities in which they operate. Principle 2 of the Nigerian Code of Corporate Governance 2018 suggests that the board be constituted to reflect an appropriate balance of skills and diversity (including experience and gender), without compromising competence, independence or integrity.
Of course, it has to be noted that simply having a code or policy in place is not enough to create meaningful change. Organisations must also take concrete actions to implement their policies and promote diversity, equity, and inclusion in all aspects of their operations.
Improving diversity, particularly gender diversity, in corporate boards is not just the right thing to do, it is also good for business. It can lead to more profitable and sustainable companies that better understand and meet the needs of their stakeholders. As we celebrate International Women’s Day and its theme “DigitALL: Innovation and technology for gender equality”, let us all commit to promoting gender diversity and inclusion in corporate leadership and continue to make progress towards a more equitable future.
About the author: Chioma Mordi is the MD/CEO of The Society for Corporate Governance Nigeria (SCGN)
The SCGN is a registered not-for-profit organisation committed to the development of corporate governance best practices in Nigeria. Today the Society is the foremost institution committed to the development and promotion of corporate governance best practices in Nigeria. cmordi@corpgovnigeria.org