Key Points:
• Embracing Diversity, Equity, and Inclusion (DEI) in the corporate business model starts with the board of directors.
• Despite progress, significant work remains to achieve boardroom diversity, with many Fortune 100 companies having less than 50% women and/or underrepresented racial and ethnic community members.
• Increasing boardroom diversity is linked to improved financial performance, with top quartile companies showing a 27% advantage in gender-board diversity and a 13% advantage in ethnic-board diversity.
Embracing Diversity, Equity, and Inclusion (DEI) as part of the corporate business model is crucial, and it starts at the top – the board of directors. While progress has been made in boardroom diversity, there is still much work to be done. A 2022 report from Deloitte and the Alliance for Board Diversity found that nearly 70 Fortune 100 companies had boards with less than 50% of members who are women and/or members of underrepresented racial and ethnic communities. This lack of diversity is not only a moral imperative but also has significant financial implications.
A new study from Ariel Investments, citing data from The Conference Board/ESUAGE, noted a decline in the share of new non-white directors from 45% to 36% from 2022 to 2023. This trend is concerning, as it suggests that progress is being undone. The benefits of increasing boardroom diversity go beyond being “the right thing to do.” McKinsey data shows a correlation between board diversity and financial performance. Companies in the top quartile of gender-board diversity financially outperform bottom quartile companies by 27%. For ethnic-board diversity, top quartile companies show a 13% advantage.
As companies push for progress, it is essential to recognize the importance of boardroom diversity. Increasing diversity at the board level can lead to improved financial performance, better decision-making, and a more inclusive and innovative company culture. To achieve this, companies must prioritize DEI initiatives and make a concerted effort to recruit and retain diverse talent. This includes setting diversity targets, providing training and development opportunities, and creating an inclusive work environment.
Ultimately, embracing DEI as part of the corporate business model is not only the right thing to do, but it is also a business imperative. By prioritizing diversity, equity, and inclusion, companies can improve their financial performance, enhance their reputation, and create a more innovative and competitive organization.
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