By ADEYEMI, Bisi
JUNE 22 2016-Increasingly, regulators, shareholders, and other stakeholders expect the Board of Directors to reflect the diversity of its broader stakeholder group and even society in general. A growing number of jurisdictions are encouraging – and some, particularly in Europe, are mandating – quotas regarding the percentage of women required on the boards.
Only recently, Apple amended its Nomination Committee Charter by including the following “The Nomination Committee is committed to actively seeking out highly qualified women and individuals from minority groups to include in the pool from which board nominees are chosen.” The move followed objections from shareholders who said they were disappointed that the iPhone maker has only one woman on its eight-member Board.
In Nigeria, the Central Bank of Nigeria (CBN) has mandated Banks and other Fanatical Institutions to appoint at least 30% female Directors and 40% Management staff as from 2014. Banks are required to disclose details of gender positions in their Annual Reports.
However, while regulators and stakeholder groups are focusing on increasing the percentage of women on Boards, diversity entails many more perspectives including ethnicity, age, experience, education, and professional expertise. Section 13.2 of the SEC Code of Corporate Governance enjoins Public companies to develop a written, clearly defined, formal and transparent procedure for appointing Directors. The written criteria for selection should reflect the existing Board’s strengths and weaknesses, required skills and experience, its age range and gender composition.
In an article published by the Harvard Business Review in June 2011 “Defend Your Research: What Makes a Team Smarter? More Women”, the authors postulate that there is little correlation between a group’s collective intelligence and the IQs of its individual members. But if a group includes more women, its collective intelligence rises.
Greater diversity can help contribute to better decision making by the Board because it reduces the risk of “groupthink” or “expert” overconfidence that may be found among more homogenous Boards. Such Boards may also be able to generate new ideas faster, or bring ideas together in new and better ways, According to recent studies by Credit Suisse and Catalyst, adding more gender, generational and cultural diversity to a Board improves financial performance and good corporate governance.
In the light of the economic, regulatory, technological, and other changes occurring across industries and markets, Boards are facing additional challenges. Boards whose Directors had the appropriate range of expertise and experience only a few years ago may no longer be optimally aligned to address the depth and range of issues facing their organizations today. Consequently, many Boards need to refresh their membership much more frequently than in the past.
It is recommended that the Board should have a written Diversity Policy with clearly defined and measureable objectives. The Board Nomination or Governance Committee should be charged with the implementation of the Policy, which should be reviewed periodically in the light of changing circumstances. The Policy and its implementation should be disclosed in the company’s Annual Report and on its website. In making Board appointments, the Board is enjoined to consider diversity in its widest sense and ensure that appointments are made on merit and having regard to an appropriate balance of skills, experience, independence and knowledge required on the Board.
ADEYEMI, Bisi is the Managing Director DCSL Corporate Services Limited. Email: badeyemi@dcsl.com.ng|www.dcsl.com.ng
