Diversity in boardrooms has been a hot topic. Companies are increasingly under pressure from shareholders and institutional investors to improve their diversity. They are also being pressured to improve their diversity because having a diverse board shows that a company is progressive which can improve its brand reputation. It can also improve the culture of the company by creating a more welcoming, equal atmosphere.

The evidence is inconsistent on the impact of diversity on board members. Many studies have demonstrated positive effects, however some studies have found different effects. Gender diversity, for example is linked to company performance in terms of the accounting return, but not the 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.

It has also been discovered that those who are considered to be tokens or minorities in a group tend not to share their opinions and opinions if they do not align with those of the majority. This can hinder cognitive variety from bringing its full benefits. Furthermore the age of a director may affect how they make decisions in the boardroom. Senior managers are less willing to alter their thinking and adopt new ideas than younger managers. This is known as the “selection biased” effect. It is important to include young directors on boards and not focus exclusively on gender diversity.


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