Diversity in boardrooms has become an issue of great interest. Shareholders and institutional investors are putting the pressure on companies to increase their diversity. They are also under pressure to do this because having a diverse board shows that a company is progressive and has a positive impact on the image of the brand. It also helps improve company culture by creating more of an open and equal environment.

However, the evidence about impact of board diversity is mixed. Numerous studies have demonstrated positive results, but other studies have shown that different forms of diversity could have distinct impact. Gender diversity is, for instance, correlated with the performance of a company when it comes to accounting returns however, not market returns. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.

Additionally it has been observed that minority groups or tokens within a group tend to self-censor by not sharing their beliefs or opinions that are contrary to those of the majority of the group. This could prevent the full benefits of cognitive variety from being realised. The age of a director can affect the way they make decisions in the boardroom. Senior managers are less inclined to change their ways and embrace new ideas than younger managers. This is referred to as the “selection biased” effect. This is the reason why https://boardroomsales.com/impact-of-board-diversity-on-company-performance/ it’s important to include young directors in a board and not just focus on gender diversity.