A colleague in finance once told me that when driving through Muskoka Cottage Country north of Toronto, she decided to note the family names on the cottages along a prestigious lake. When she got home she looked up the names on her computer. They were clustered together on boards of directors.
Despite the strong business case for diversity on corporate boards of directors, informal social networks remain an important source of board membership, and informal social networks tend to be pretty homogeneous. People you already know are more likely to come to mind than people you don't know when thinking of potential board members. Board membership is also a nice feather to put in a friend's cap, especially a friend who can reciprocate: It's prestigious, interesting, not too time consuming and can be relatively lucrative work.
There are other reasons why board members might prefer working with familiar others. For one, board meetings can involve travel and events that are more comfortable with similar companions. For another, meetings can involve weighty decisions and difficult conversations that are easier to have with people you already know and trust. Understanding others' intentions and assumptions, and how to interpret their gestures and speech, greases the wheel of interaction and communication.
The comfort that comes with this homogeneity, however, also depresses healthy differences of perspective that can add value to board discussions and their companies. Diverse groups are more likely to incorporate diverse perspectives into their deliberations, not only because people with different backgrounds bring different perspectives to the discussion, but because the mere presence of different others elicits divergent thinking. This, in turn, means that diverse groups tend to produce more integrative decisions and innovative solutions. It is no wonder, then, that research shows greater board diversity is associated with better performance for companies.
There are several steps that can be taken to increase board diversity, starting with raising coming generations to have and to value heterogeneous social networks. Ideally this would begin in childhood, but it's never too late: Business schools are beginning to actively cultivate more heterogeneous student bodies, not just for their reputation and financial benefits but for their educational and professional ones as well. Drawing from a wider pool of talent, interests and backgrounds enhances excellence, creativity, and learning, and it graduates a stronger set of MBAs. A nice consequence of this is likely to be more diversified business leadership and company boards down the line.
Immediate steps that can be taken are to require companies to publicly publish their board memberships and compositions, similar to what the Ontario Securities Commission is proposing to do. What gets measured gets valued, and this would keep up public and investor pressure for diversifying boards. A publicly available database of company board memberships and compositions would also serve as a useful scouting tool for potential board members with prior experience.
Canadians are likely to find strict quotas for the percentage of women on boards unpalatable. Norway's quota of 40 per cent women on boards was chosen for good reason: Women in token numbers are easy to ignore and to view as just there to represent "the woman's perspective" rather than as individuals in their own right. One recent study showed that after losing a female board member, companies usually replace her with another woman. This is classic stereotyping: viewing women as interchangeable with one another and as there to play a gender role. For diversity on boards to be effective and sustainable, a critical mass is required. Groups with more women in them move away from masculine norms of dominance contests toward egalitarian norms for participation, reducing "groupthink" and encouraging multiple perspectives to be voiced and heard.
Before equal opportunity laws were put into place requiring employers to publicly post job opportunities and encourage women and minorities to apply, hiring in general was mostly done by word of mouth. Jobs were learned about from friends and obtained through friends. Recognizing that this practice undermines principles of excellence, equity and equal opportunity, such informal hiring practices were discouraged by law for the good of the people, and, it turns out, their employers. The appointment of board members should be brought up to current standards to do the same, and women and minorities with board potential should be encouraged to apply.
Jennifer L. Berdahl was recently announced as the Montalbano Professor of Leadership Studies: Women and Diversity at the University of British Columbia's Sauder School of Business in Vancouver. Dr. Berdahl begins the role in July. She has studied the treatment of women and minorities in the workplace for more than 20 years and has acted as an expert witness and adviser to Parliament. Her research recently informed Facebook chief operating officer Sheryl Sandberg's bestselling book Lean In: Women, Work, and the Will to Lead. She was most recently a faculty member of the University of Toronto's Rotman School of Management, where she was a professor of organizational behaviour.