Enhancing Board Diversity: Defining DEI Governance Strategy


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As corporations strive for greater boardroom diversity, the progress, while commendable, reveals underlying disparities that merit closer examination. Drawing upon industry reports and trends, including insights from both: Bedford Group Transearch’s 2023 Mining Compensation Report and 2023 Biotech Compensation Report, we delve into the nuances of board composition and the continuing imperative for continuing to advance Board Diversity.

Diminishing Board Diversity Progress

Recent years have witnessed a slow but positive shift in female representation across corporate boards. For instance, in the Canadian mining sector, female board representation has increased incrementally from 13% in 2018 to 21.8% in 2022. For the North American Biotech sector female Board representation for Nasdaq listed companies has jumped from 15% in 2020 to 26% in 2022.

That said, the conservative increase in female board participation from 19.2% in 2021 to 21.8% in 2022 in Canadian mining and 25% to 26% in North American Biotechnology shows a significant marginal year over year decrease compared to previous years. This is concerning as it might well suggest the biggest gains in female representation on a year over year basis are potentially behind us, when we are only halfway to gender parity at the board level.

When taking a closer look at Nasdaq traded Biotechnology companies that included a Board Diversity Matrix in their proxy filings, a similar trend presents itself; 16% of directors identified themselves as a visible minority in 2022. This was essentially unchanged from 2021.

When we cast a wider net across industries, the data reveals a patchwork of progress. In sectors like technology and finance, where female board representation hovers around 25%, female directors are making bigger gains. But these still relatively low numbers underscore a universal need for faster change.

The push for greater board diversity has increased substantially in the United States and Europe, with prominent asset managers adopting policies against re-electing directors and where public exchanges require board diversity disclosures and minimum thresholds. All this said, progress overall has been modest, with female participation on the boards of large, listed companies increasing from 15.5% in 2013 to 25.1% in 2021 across 50 jurisdictions.

Sector-Specific Disparities: Diversifying Policy Bias

The disparity in representation is more pronounced in certain sectors. In traditionally male-dominated fields, such as mining and energy, the gap widens, with female representation and lagging behind. Conversely, industries with a stronger emphasis on direct social connection, such as healthcare and education, tend to show more equitable patterns, suggesting the influence of sector-specific norms and values on board diversity practices.

Stockholder and Stakeholder Benefits From Board Diversity

The Bedford Group Transearch’s Mining Compensation Report 2023 emphasizes the potential benefits of board diversity, including lower levels of risk-taking, higher levels of firm innovation, and greater overall firm value. It’s been argued that board diversity promotes these positive outcomes and contributes to driving value for shareholders.

The report also highlights the need for consideration of actions to promote greater diversity, such as developing a board skills matrix, looking beyond traditional recruiting pools, and implementing board member term limits to promote board renewal.

Keeping to a Competitive Compensation Standard

No matter who you’re looking to get onto your board, you have to know how the competition would reward them — then match it or top it. Compensation is crucial for attracting top board directors, acting as a beacon to draw the most transformative talent. It’s about valuing their strategic input with a package that mirrors their worth.

Top candidates get snapped up quickly. You may only have one shot at the director that’s the perfect fit for your board. It’s crucial to get the offer right on the first try.

Competitive compensation signals a commitment to excellence, encouraging high-caliber individuals to join and elevate your organization.

Strategies for Bridging the Board Diversity Gap

To bridge the gap in both representation and compensation, corporations should adopt multifaceted approaches:

1. Commit to inclusive recruitment practices

It seems obvious but achieving board diversity has to be driven by a concerted effort. Expanding the search for board candidates to include diverse networks and adopting inclusive criteria will help identify and elevate qualified women into board positions.

2. Promote equity in leadership roles

Ensuring women are not only present on boards but also featured in leadership positions within those boards and within C-suites is crucial for closing the diversity gap.

3. Conduct regular diversity audits

Perform routine assessment of current composition across gender, race, LGBTQ+, disability status. Set goals that align with diversity efforts based on business needs and stakeholder expectations.

4. Secure leadership commitment and stakeholder buy-in

Get commitment from the board and CEO to prioritize diversity. Consider adopting a formal diversity policy.

5. Expand recruiting efforts

Use wider candidate sources. Require that diverse candidates be considered. Leverage diversity-focused executive and board search firms. Look outside your sector. Good directors can be found in any number of adjacent or even non-obvious sectors.

6. Consider candidates from foreign jurisdictions

Organizations that have toe holds in one or more regions have an unique opportunity to find high quality board directors. Casting the search net beyond the zones adjacent to HQs can yield some surprising and often under-utilized candidates.

7. Rethink candidate requirements

Consider candidates without prior board experience. Seek those with other backgrounds, like academia, law, technology.

8. Add board seats

This one is controversial and not for the faint of heart. But, if a board is well established, and waiting for turnover is not a fast enough solution for injecting more diversity, adding new seats is an option.

9. Formalize succession planning and term limits

Proactively plan for retiring directors. Source qualified, diverse candidates in advance. Setting term limits and board positions also ensures that the board stays nimble and refreshed.

10. Foster an inclusive corporate community standard

Ensure diverse perspectives are valued. Provide training for new directors. Evaluate and enhance board culture on an ongoing basis.

The Road Ahead For Board Recruitment And DEI Culture

The effort to create boardrooms that are equitable—where diversity is evident not only in the makeup of their members but also in their pay and power—continues. While the data points to gradual progress, the disparities in compensation for women board members highlights the need for a sustained and strategic effort to dismantle systemic barriers and foster truly inclusive corporate governance.