Why the financial crisis is a wake-up call on diversity

With the recent financial crisis helping to push board accountability into the spotlight, Lucy P. Marcus, professor of leadership and governance at IE Business School in Madrid, is urging companies to be more open to non-traditional candidates for their boards.

She says:

“It is easy to go with who you know, who’s in your club and who you went to school with. Intuitively, we all feel comfortable with people who are like us. But we need to look at new ways to find different people… When I see an organisation with a board that has a preponderance of people with similar – if not identical – profiles, it makes me wonder about the business as a whole.”

Prof Marcus, chief executive of Marcus Venture Consulting, knows what she’s talking about. She is a non-executive chair of the Mobius Life Sciences Fund and is non-executive director and chair of the board audit committee of BioCity Nottingham.

The crisis, she says, has been a wake-up call to companies that “they need to make change”.

“What we’ve been doing until now hasn’t been working; something has gone wrong. We need to re-examine the way we do business and look at who’s leading our businesses.” Many companies are coming to the conclusion that diversity is needed on boards, she adds. “You need to have a dynamic group of diverse people: diversity of thought, experience, knowledge, understanding, colour, age, international perspective, gender, and more.”

 

Companies claim that one of the difficulties of appointing women – or indeed any non-traditional candidates – is that there aren’t enough of them who could do the job. The training ground for board membership tends to be experience at “C-suite” level. The proportion of women chief executives in Fortune 500 companies was just 14.4 per cent last year; the proportion occupying board seats was 15.7 per cent, according to figures compiled by Catalyst, a nonprofit organisation focusing on women and work issues. Companies say they are loath to put less experienced directors on the board – read: those in middle management, who do not have direct experience at running a company.

But that is just an excuse. Board member criteria should not stop at C-suite experience; rather it should encompass particular skills and perspectives, says Prof Marcus, who is the founder of HighTech Women, a forum for women in technology-related jobs to meet and mentor each other.

“There are countless talented women who can and do serve very ably on boards, and they can even bring a bonus of adding much-needed diversity of other kinds as well, be it entrepreneurial, international, functional, or cross-sector experience. The important thing is not to be wed to a cookie-cutter image of what makes a strong board candidate.”

Once these non-traditional candidates win a seat at the table, directors must prepare – or “on-board” – them comprehensively, she says.

“Give them an initiation package that is full of minutes from past meetings and other information that they need to know. Be sure they are given time with the chair to understand the challenges that the board faces. Give them time to meet with a senior executive team. Give them training and board education. We need to give those board members the opportunity to be successful.”

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