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Diversity on
Corporate Boards: Why It
Matters
by Rushworth M. Kidder
There's lots of talk
these days about
socially responsible
corporations. But how do
you know one when you
see one? What factors
make Company A more
socially responsible
than Company B?
Among the obvious
criteria are policies
and practices about the
environment,
transparency, families,
and the workplace. But
another looms
particularly large these
days: the role of women
and minorities. Many
rating systems ask a
direct question: How
many minorities and
women sit on your
corporate board?
The answer speaks to
issues of diversity and
inclusiveness -- values
that, in a democracy
built on equality of
treatment under the law,
are seen to be morally
essential. Translated
into corporate practice,
these values are often
justified through two
lines of reasoning:
1. Board diversity
reflects a similar
diversity within the
customer base. That
appeals to customers.
Those who make conscious
purchasing decisions
based, say, on Shopping
for a Better World, a
guide published by the
nonprofit Council on
Economic Priorities that
ranks corporations on
seven socially
responsible criteria,
will reward
inclusiveness by voting
for it with their
dollars.
2.
Board members from
different backgrounds
help guide firms into
new markets and avoid
pitfalls in old ones. By
helping assess the
impact of products,
services, marketing
strategies, advertising
campaigns, and even
charitable contributions
on women and on specific
minority communities,
they provide valuable
input into top-tier
decision making.
But let's face it. Only
a fraction of purchasers
consciously shop for a
better world. And you
get objective soundings
about women and
minorities without
putting a few of them on
your board. So why,
beyond the noble
rightness of doing so,
should a company opt for
board-level
inclusiveness?
The real answer lies in
a simple fact: Diversity
improves the decision-making
climate. That translates
into better top-level
choices among competing
strategies. And that
adds strength to the
bottom line.
But why does diversity
improve decision making?
Because, at the board
level, the toughest
choices are not about
finance, politics, or
people. The really big
ones are about ethics --
about the fundamental
moral direction of the
firm. They are tough
because, typically, both
sides are morally right.
And because they are
right-versus-right
issues, they can't be
sorted out by trying to
see which side is "wrong."
Instead, they need to be
thought out from the
basis of the shared
moral values of the
board and the community
it represents.
Does adding diversity to
a board challenge those
shared moral values? No.
Assuming that the added
board members are
ethical individuals,
their moral principles
will include the same
underlying sense of
responsibility, fairness,
respect, responsibility,
and compassion as the
previous board members.
The differences they
bring will not be at the
level of values, but at
the level of strategy
and tactics. They won't
judge from an alien
moral perspective; but
they will see with
different eyes. And that
will add dimension and
depth to the ethical
discussions. What the "old"
board might have seen
simply as right may well
become, on the "new"
board, right versus
right.
What, then, does
diversity add?
Elasticity, breadth,
range, expansiveness,
new options -- a whole
host of bottom-line-related
benefits. Diversity
doesn't challenge or
violate the core moral
values, but sees in them
added ways of doing
right -- some of which
may never before have
been contemplated.
Some years ago, an
educational video titled
"Why Man Creates" asked
the question, "Where do
ideas come from?" The
answer: "From looking at
one thing and seeing
another." That, in a
nutshell, is why
diversity is both a
moral and commercial
imperative. It simply
breeds better right
ideas. And in the end,
right ideas are what
bottom lines are all
about.
(return to Advocacy &
Corporate Governance
Committee)
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