Corporate boards have a diversity problem – and not just the one you think

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Neil Desai is an executive in the technology sector and serves on the board of directors of private sector, charitable and crown organizations. He previously served in executive roles with the government of Canada.

Canada’s economy is struggling with a stark productivity decline. In trying to find reasons and remedies, the causality between diversity in leadership – specifically the lack thereof – and the financial performance of companies has been raised but is now under scrutiny.

Better representation of visible minorities and genders is undoubtedly important and vital for a company’s success. However, to leverage the benefits of diversity, especially from a governance perspective, we must have a more fulsome definition of it. One of the greatest diversity challenges for Canadian companies’ financial success is much less visible.

Canada’s current board leadership seems to be comfortable surrounding itself with generalists. But in a complex global economy evolving with greater velocity, there is a pressing need for more technocratic directors.

Boards around the world are wrestling with a myriad of nascent governance challenges: AI adoption to increase productivity while managing the potential downside risks, cybersecurity threats that could disrupt or even halt core operations, technology procurement to optimize operations and keep pace with competitors.

We’ve seen a rapid transition from tangible to intangible assets driving business strategies and outcomes. Hybrid work environments to maintain employee satisfaction while trying to improve productivity. Geopolitical unrest that could hinder critical supply chains or market access.

Canadian companies are not insulated from these tectonics shifts. All these issues must be at the top of high-performing board agendas – and there must be meaningful plans in place to address them.

Despite the breadth and depth of these challenges, the majority of Canada’s corporate governors continue to come with traditional finance, accounting and legal backgrounds – or rose to business prominence under much different macro-circumstances.

This is not to say those professions are no longer relevant in modern governance and directors with decades of industry specific experiences aren’t valuable. But a hallmark of high-quality directors is that they’re always learning from multiple sources – looking beyond management’s perspectives – to provide oversight and foresight and to challenge the status quo.

The Institute of Corporate Directors and Certified Professional Accountants of Canada have made efforts to introduce educational modules addressing some of these nascent governance challenges. However, there is danger in relying on surface level understanding of deeply technical subject matters when it comes to governing organizations. Risks can be missed, as can opportunities for transformation.

The structure of boards and their operations also require attention. Agendas often get bogged down in oversight functions and limit time for generative discussion around emerging risks and opportunities. Committees also don’t have natural homes for many of these emerging areas of governance.

Ultimately, organizations and their shareholders would be better served by widening their thinking on the skills matrix they’re considering when filling open board roles. They should equally widen their recruitment pool to find directors with tangible practice in these nascent areas.

A strong resource for this is the Council of Canadian Innovators’ Innovation Governance Program, which maintains a cadre of potential board members from the innovation economy who have diverse experiences and have gone through governance training.

By tackling this less visible diversity challenge in Canada’s boardrooms structurally, our companies would be better situated to address some of the most meaningful challenges they and our economy face today and in the future – including our productivity decline. It would also likely have the added benefit of making our boardrooms more visibly diverse in a manner that drives shareholder value.