ACCA SBL Syllabus B. Governance - Diversity on boards of directors - Notes ^{8 / 12}

DEFINITION OF BOARD DIVERSITY

• means having a range of many people that are different from each other.

• factors like age, race, gender, educational background and professional qualifications of the directors to make the board less homogenous.

In implementing policies on board diversity, both the company’s chairman and the nomination committee play a significant role.

• The chairman, being the leader of the board, has to facilitate new members joining the team and to encourage open discussions and exchanges of information during formal and informal meetings.

• The nomination committee should give consideration to diversity and establish a formal recruitment policy concerning the diversity of board members with reference to the competencies required for the board, its business nature as well as its strategies. 

  The committee members have to carefully analyse what the board lacks in skills and expertise and advertise board positions periodically.

BENEFITS OF BOARD DIVERSITY

1. More effective decision making.

2. Better utilisation of the talent pool (not only male involved, also woman).

3. Enhancement of corporate reputation and investor relations.