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Corporate Board Diversity

Corporate Board Diversity is a term used to describe the broad range of demographic attributes, characteristics and abilities within a boardroom. This could include gender, age education as well as professional experience and skills as well as philosophies, cultural identities and sexual orientation, race and religion. This diversity can cultivate a useful range of perspectives and capabilities that will serve the business needs and future needs of the business.

A successful company needs an effective board capable of performing effectively. Therefore, the composition of the board should be designed to achieve this objective. Diversity is one way the board can attain this goal by fostering different mental, leadership and emotional ways of thinking that increase awareness of the risk.

Investors are progressively demanding that directors be diverse. Some of the largest institutional investment firms are actively voting against board members who don’t meet their standards of gender and racial equity. CalPERS the state pension fund workers has sent letters in August 2017 to 504 companies that are listed on Russell 3000, demanding that they devise and implement a policy for diversity.

Certain states also have regulations that force companies to adopt measures to achieve board diversity. For example, the state of California requires that public companies with headquarters in the state have a certain percentage of female and underrepresented minority directors on their boards by 2021. Additionally, companies are required to reveal the racial as well as ethnic diversity of their boards.

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