Are today's boards ready for tomorrow?

In 2013, a Forbes article described the majority of Fortune 500 boards as an “Old Boy’s Club” where members were mostly “male, pale and stale”, and had absolutely no regard for board diversity. In more recent years, headlines have taken on a more optimistic tone, with the S&P 500 having no all-male boards in 2019 , and diversity being linked to increased profits.

However, I don’t believe this is enough.

This check-box approach continues to plague high-profile organisations, and financial services organisations are certainly no exception, with women of colour only holding 4.6% of Fortune 500 Board Seats, despite investors such as Goldman Sachs refusing to back IPOs where all investors are white, straight men. Obligatory pride flag, anyone?

While many researchers are quick to point out that numbers on the rise are “encouraging” - and yes, they are better - the stark truth is, in an ultra-connected, ultra-fast era, change moving at less than 1% a year is anything but keeping pace. With the rapid speed of technology transformation only set to continue, can these boards speak with confidence to the future? Can they really represent and understand their current workforce?

Diversity is the destination

I’m not attempting to undermine the expertise of existing boards. They know all about the intricate ins-and-outs of the past, and there are many highly skilled, forward-thinking, and outward-looking experts among them. But with digital innovation increasing in speed, as a collective, do they know what’s on the horizon, and can they react quickly enough to it? Can they proactively put measures in place to build a dynamic, flexible approach to the changes to come?

Let’s take Google as an example. The median age of Google’s employees in 2017 was 30. The median age of the 11 members of Google’s parent company Alphabet’s board is 61. Their ages range from 47 to 75, three out of the 11 are female, and there’s just one woman of colour, further corroborating the fact that women of colour are the most underrepresented. Robin L. Washington, the only black female board member, was appointed in 2019 . While there is no doubt that Google is taking steps to ensure best diversity practices, the gap in age range is one that should ultimately be pulled closer together. And this is Google, with its finger on the pulse of our lives.

Instead of gearing up for further technological advancements, these executive decision-makers are likely shifting down in anticipation of retirement. It’s time to create a clearer path for modern methods and diversity in thinking.

Boards may need to operate differently in the future, and to do that they need to be innovative, creative, and implement best D&I practices. Many successful companies hold D&I in high regard for the following reasons:

• It gives them a competitive advantage

• It serves as social justice

• It demonstrates corporate social responsibility

• It’s essential to their growth strategy

• It adheres to compliance procedures

Ingredients for innovation

Boards need people from diverse backgrounds with diverse skills and viewpoints who will challenge them and steer the ship forward into a new era. This is the only way to enjoy continued success. Most executive teams in financial services have board members who’ve spent 30 plus years in the industry. While this level of knowledge is no doubt an asset, are they in touch enough with the direction the industry is heading, their customers, and even their own workforce, to make the right decisions at the right time?

While an innate understanding of the industry and common language is bordering on essential (although that’s not to say that someone from outside your industry can’t bring you the new perspective you need), diversity can be built into talent recruitment for the financial services sector by actively championing diversity instead of simply ‘woke-washing’ or attempting to cash in on a cultural movement.

Some experts are quick to point out the perils of statutory, or mandated diversity, and here in the UK there is a fine line between the legal method of positive action, and the illegal approach of positive discrimination. However, in countries such as Norway, Iceland, Spain, and France, there is a legal requirement that at least 40% of boards are female .

Several studies have also linked board diversity to increased innovation and adaptation, thanks to the varied range of creative and critical thinking. Furthermore, they have also revealed that the wider variety of perspectives and issues brought about by board diversity makes the entire board more sensitive to corporate social responsibility initiatives, and help the company form a better response to any issues.

Ultimately, corporations need to stop seeing diversity as a check-the-box activity but instead as an essential, inevitable, evolutionary necessity that has been accelerated by the catalyst of Covid. There’s also an argument to say that boards should challenge their own status quo by bringing in people with completely different perspectives who can provide fresh insights and new ideas. Perhaps it’s even time for financial services boards to look outwards to other industries for talent opportunities.

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