Diversity, Tenure and Board Refreshment

Diversity feels a bit like the 'topic du jour'. Yet why is it so narrowly conceived?

The issue that is often mistaken for addressing the need for greater boardroom diversity is the frustratingly narrow question of women on boards.  Mistakenly thinking that striving for greater boardroom diversity means ‘we need to get more women on boards’ as the end game misses the point and, I would argue, undermines the achievement even of that goal itself.  With this limited thinking, we set soft targets (for instance a modest “30% of board seats should be occupied by women”).  Sadly this is evidence of the very problem itself.  Casting the soft target in this way says:

  • Somehow this is about women (after all, why not “at most 70% of board seats should be occupied by men”?) and is the fault primarily of men but also of women already in the boardroom – a message which is understandably a significant deterrent to a lot of men (and some women) already on boards to think about the real issues; and
  • It also says that diversity is a gender equity issue rather than being an issue of the enhanced performance for the organisation that results from a board comprised of a range of different skills, experience, backgrounds and demographics (including gender, age, cultural, socio-economic, geographic etc).

If policy-makers on this point really believe the research-based reason for encouraging boardroom diversity – the competitive advantage reason – then the better soft target would be “at least 40% of each of the male and female genders on every board”; making it no longer a “women’s problem” which is the “fault” of men and women already on boards, but a constructive way to think about the real value of getting fresh and diverse perspectives on boards.

With this refreshed approach on diversity, succession planning for boards might also contemplate a range of diversity-focused enhancements, like:

  1. Mapping the percentages of each gender on the board and setting targets (much higher than a mere 30%) for each gender.
  2. Mapping the average tenure of board members and the board itself explicitly targeting an average board tenure for all directors of less than, say, 6, 8, 10 or 12 years (or more depending on the sector and nature of the company), as opposed to the rigid and often limited thinking about absolute tenure limits for each individual director when each director is different and brings different things to different companies and for differing periods of time.
  3. Mapping the associated concept of the spread of years from ‘longest standing’ to ‘newest’ appointees on the board to understand the extent to which there is balance of corporate knowledge and refreshment.
  4. Mapping the average age of board members, as well as the total age range of oldest to youngest and, again, the board itself explicitly setting a target ‘average age’ and/or perhaps ‘age range’.
  5. Annual chair and director succession discussions, that make the discussion of the chair’s intentions, and the views of the rest of the board about the chair and their own tenure, a standing open item for discussion that is conducted as part of the annual board evaluation rather than being a silent issue as it so often is for boards.
  6. Mapping the demographics of the key stakeholder groups of the company or organisation (especially customers, users of services etc) and setting demographic targets for the company’s board that better reflect the relevant demographics of the company’s business or operations, to give those stakeholders greater confidence that the decision-makers (the board) actually understand what make these key stakeholders tick.

Doing a ‘skills matrix’ or ‘board composition matrix’ is certainly flavour of the month in governance right now.  Boards have got generally the right idea that they need to pay close attention to the spread of skills and experience but it ought also to be done in conjunction with a more robust board succession plan that takes into account the full diversity attributes of the board rather than purely the skills, experience and “competencies” as they are often framed by boards.

It is time to stop thinking of boardroom diversity purely as an issue of equity or ‘political correctness’ but of building dynamic boards for better performing organisations.  Of course, if shifting the thinking also achieves an equitable outcome then can’t be a bad thing either, thinks this commentator, but it is not the main game for boards.

Elizabeth Jameson

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