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Numerous studies have shown that diversity can have an impact positive on the performance of boards. A diverse group of people has different experiences, perspectives, and angles to approach an issue, which can result in solutions that would otherwise be missed by a board that is more homogenous. This is especially the case for boards that comprise representatives of underrepresented groups. They will be able to understand the preferences and values of these groups, which could assist them in better serving those groups as clients.
The presence of diverse backgrounds and experiences on a board can boost morale and increase trust. When board members feel that their voices and experiences are being heard, they feel more committed to the overall success of the company. It is vital to track your board’s progress in promoting diversity, and identify any obstacles.
Another area where diversity can contribute to mitigating risk. A recent study by Berger et al. The study concluded that greater gender diversity and age diversity on the board resulted in more effective risk management, as well as a reduced exposure to market risk. The same study reveals, however, that high levels of diversity on the board could cause problems with cohesion and communication.
Boards that have a diverse composition are more aware of and sensitive to the unique challenges faced in communities that are not represented. This can motivate them to take steps to promote social responsibility within their business. It is essential to continue to look for skilled women, people of diverse backgrounds, and LGBTQ candidates to fill board positions.
https://boardroomsales.com/evolution-of-corporate-governance/
