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Diversity in the boardroom – Practical challenges in achieving DE&I milestones
Diversity in the boardroom – Practical challenges in achieving DE&I milestones

October 11, 2023

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Diversity in board composition has become more than just a talking point; it's now widely viewed as essential for long-term business success. A diverse board brings together people from varied walks of life, enriching dialogue and ultimately the decision-making process.

Research supports the benefits of board diversity. For example, a study by McKinsey & Company found that companies with more diverse boards are financially outperforming their less diverse peers. Similarly, research by Credit Suisse revealed that companies with at least one female board member often outperformed those with all-male boards. These findings suggest that a diverse board isn't just a matter of fairness or representation; it's also good for business.

The regulatory landscape of countries like India is also pushing companies toward diversity. India’s Companies Act of 2013 mandates that every listed company must appoint at least one woman to its board of directors. This is designed to improve gender diversity in the boardroom and promote equal opportunities in the workplace. However, there is still a long way to go when it comes to achieving diversity goals. A report observed that only 18% of NIFTY500 companies had a woman director as of 2022. This suggests that there is still a lot of work to be done when it comes to increasing gender diversity in the boardroom

Challenges in ensuring DE&I in the corporate boardroom

Implementing diverse boards can come with its own set of complexities. Some of the common challenges include:

  • Resistance and lack of awareness: Some individuals within an organization may resist the idea of diversifying the board due to various reasons, such as fear of losing influence. Some organizations may not be aware of the benefits of diverse boards or may not prioritize diversity in decision-making.
  • Unconscious bias and hiring impact: Unconscious biases can affect decision-making processes, lead to the underrepresentation of certain groups and hinder diversity efforts. In addition, finding qualified candidates from diverse backgrounds can be challenging.
  • Tokenism: Tokenism occurs when individuals from underrepresented groups are included on the board solely to meet diversity requirements, without being given opportunities to contribute.
  • Cultural barriers: Cultural differences and language barriers can pose challenges in effective communication and collaboration among board members from diverse backgrounds.
  • Lack of DE&I vision, ownership and accountability: Without clearly defined goals and accountability measures, diversity initiatives may not be effectively implemented or monitored, leading to limited progress.

Addressing these challenges requires a commitment from organizations to foster an inclusive culture, raise awareness about the benefits of diversity, and implement policies and practices that promote equal opportunities for all individuals.

Building a roadmap founded on diversity

To increase diversity in board compositions, it's crucial to be proactive rather than reactive. Start by conducting a thorough evaluation of your current board's skills, experiences, and demographic attributes. This will highlight gaps and areas where diversity could be beneficial.

In addition, incorporating DE&I as a central part of the board's hiring agenda is crucial. Implement a clear and transparent nomination process that minimizes biases and encourages the inclusion of diverse candidates. Organizations may consider utilizing external firms that look beyond traditional networks to find qualified and diverse talent.

It's critical to foster an inclusive environment where diverse perspectives are valued and leveraged. Channels for open discussion and training sessions on the value of diversity and inclusion are invaluable for shifting mindset.

Measuring and reviewing progress is equally vital. Establish clear, quantifiable metrics to track the impact of diversity on board performance and company outcomes. Regularly track and report on these metrics. This constant evaluation will not only hold the board accountable but also provide insights into what's working and what needs adjustment.

Conclusion

In today's rapidly changing and increasingly complex business landscape, a diverse board isn't just an ethical imperative or a compliance requirement it's a strategic necessity. Research and real-world case studies repeatedly indicate that companies with varied boards tend to outperform those lacking diversity, both in terms of financial results and quality of decision-making. A diverse board sends the message that a company values inclusivity and multiple viewpoints, making it more attractive to top-tier talent, socially-conscious investors, and diverse customer bases.

As businesses increasingly operate on a global stage, the ability to understand and connect with different cultures and markets becomes invaluable. Therefore, board diversity should not just be seen as a means to improve internal metrics, but also as a vital strategy for external engagement and long-term resilience. It is also critical to conduct progress reviews that are both retrospective and forward-looking, examining the effectiveness of existing DE&I initiatives while setting goals for future diversity enhancement. 


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Jaya Vaidhyanathan
Chief Executive Officer

Jaya Vaidhyanathan is the CEO of BCT Digital, an award-winning global digital transformation company delivering disruptive FinTech, RegTech, & CleanTech solutions to large organizations across industry verticals. Jaya believes in making the present count while keeping a hawk's eye on the future & brings these ideas to several roles that she dons. She serves as an External Director on the Global Board of PwC, an Independent Director on the PwC India Board, IndiGrid & UTI Asset Management. Earlier, Jaya served on the boards of Altran Group, Mahindra Sanyo Steel & Spice Mobility. She is also an advisor to high-impact social welfare organizations, like the Mastermind Foundation. Under Jaya's leadership, BCT Digital has diversified from the original business of assessing credit risk to managing the entire spectrum of risk, with specific focus on sustainability. Environmental, Social & Governance (ESG) is a new focus area for BCT Digital.

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