NEW YORK ( TheStreet ) -- Here's a new mantra for Occupy Wall Street protesters whose wrath has partially targeted boardroom fat cats: No Diversity, No Peace!With few exceptions, corporate boards have historically been white and male. Statistics compiled by the Alliance for Board Diversity reveal that among Fortune 100 companies, the majority of board members, 82%, are men. Of those, 69.9% are white men, while minorities and women made up the other 30.1%. The percentages for Fortune 500 companies were even worse. There, men hold almost 85% of all board seats, with white men representing 74.5%, minority men 9.9%, white women 12.7%, and minority women just 3%. Many are cautiously optimistic that times are changing. As companies try to find ways to navigate the persistent economic doldrums, boost undervalued stock prices, and appeal to a frustrated and cynical investing public, many are starting to cast a wide net by looking for effective ways to improve governance and increase shareholder value. It is a nascent trend that extends into their own boardrooms, as many are concluding that a diverse board of directors is a critical component of a successful business strategy. Domino's Pizza UK & IRL ( DOM.L) is the most recent example of what some hope will become a sea change in corporate governance. Until June of this year, Domino's board exemplified the old school, with no female director among its members. As of September 30, women now hold 20% of its board seats. Other companies like Crocs and Bunzl are reportedly making similar strides. While board diversity is not a new topic, it appears to have picked up renewed energy and focus, according to Reatha Clark King, Ph.D., a National Association of Corporate Directors board member and former president and board chair of the General Mills Foundation. King believes the change is being driven in part by women and minorities who have already joined board ranks. But only in part. Other interested parties -- including significant numbers of directors who fit the traditional mold -- also see board diversity as important to a company's overall performance and long-term success. While the changes at Domino's and Crocs are thought to reflect just such growing awareness on all sides of the boardroom demographic, it may yet be premature to read too much into the changes at these particular companies. That said, they do certainly underscore just how compelling the case for diversity can be.
Governance experts convincingly argue that diversity of opinions, ideas, and experience enhances a board's capacity to identify and understand risks and to develop effective business solutions to tackle them. They point out that companies led by boards mirroring the diversity of their own stakeholders -- employees, consumers and investors -- are able to meet the concerns and expectations of those stakeholders in ways that elude more homogeneous groups. Diversity, according to this view, promotes creativity and innovation, helping companies respond to challenges and expand into new markets. Finally, and importantly, diverse board members tend to be more independent and may be more effective in keeping management from running off the rails. Research also appears to provide empirical support for the business case. A study commissioned by the California Public Employee's Retirement System's Investment Committee found that companies with a significant percentage of diverse board seats beat the average returns of the Dow Jones and Nasdaq indices over a five-year period. In addition, research conducted by Catalyst, a nonprofit organization whose mission is to increase opportunities for women in business, found that Fortune 500 companies with higher representation of women on their boards outperformed other companies on three key indicators: return on equity, return on sales and return on invested capital. Studies by McKinsey & Company reached a similar conclusion. Companies hoping to succeed in a global marketplace cannot afford to ignore this data. Right now, to be sure, women and minorities continue to be underrepresented in boardrooms across the globe, despite the progress made by some companies. In some quarters, efforts are under way to motivate -- even compel -- companies to work harder to achieve board diversity. The National Association of Corporate Directors reports that the European Commission has introduced quotas into new securities trading rules for female directors, while several European countries have adopted legislation requiring companies to ensure gender diversity on their boards. Responding to consistent calls for greater transparency on board diversity issues, the U.S. Securities & Exchange Commission took a different, less controversial approach, adopting a rule requiring companies to disclose how it considers diversity when it nominates board candidates, but not mandating them to actually do so. In any event, this new rule still underscores the importance that investors place on board diversity.
Experts like Reatha Clark King see the renewed focus among boards, management and other interested stakeholders on boardroom diversity as a harbinger of even greater transformations ahead. "We are coming to an inflection point where the curve will start to change shape and we will begin to see women and minorities entering boards at greater numbers," says King. "There is clear evidence that a diverse board is a sign of an enlightened and progressive company interested in sustainable success. The winds of change are refreshing." Follow Richard Levick on Twitter@richardlevick. Richard S. Levick, Esq., is the president and chief executive officer of
Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of The Communicators: Leadership in the Age of Crisis and Stop the Presses: The Crisis & Litigation PR Desk Reference, and writes for Bulletproofblog . Mr. Levick is on the prestigious list of "The 100 Most Influential People in the Boardroom," which is compiled by the NACD and Directorship Magazine. Reach him at firstname.lastname@example.org. > >> Bull or Bear? Vote in Our Poll