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Organizations are seeking a broader range of experience and expertise when it comes to finding diverse board candidates, pointing to technology and cyber-security executives, general counsel and chief human resources officers as some of the roles that may provide more pathways to the boardroom and, in turn, help boards achieve greater diversity.
‘Increasing skills, experience and background diversity characteristics continues to be a focus’ in boardrooms around the world, says Kaley Childs Karaffa, head of board advisory for the Americas at Nasdaq. Karaffa is also the lead author of the recently published Nasdaq 2023 Global Governance Pulse report, which shares insights from a global survey that collected data from more than 730 board members, executives and governance professionals across organizations and industries globally.
Although discussions in years past questioned whether there were qualified, diverse board candidates, Karaffa says there has been an expansion in thinking. Moreover, she explains, ‘there has been an expansion of the criteria for individuals that are qualified for board service.’
That expanded pathway onto a board may not only help boards meet diversity targets but also offer broader benefits, she continues. Those board members add significant value, helping boards expand the perspectives that are represented in multiple facets. In addition, Karaffa says she has observed clearer standards of what a truly diverse board is and an unwillingness for boards to fall below their goals for board diversity when a diverse director resigns or retires from a board.
The boardroom skillset
The Nasdaq 2023 Global Governance Pulse also examines the new and prioritized skills boards are looking to add. When asked which skills would most enhance their board’s composition and ensure alignment to the organization’s strategy, 14 percent of survey responses cite technology and innovation and 10 percent point to cyber-security and data privacy.
While Karaffa describes these findings as largely in line with what she sees in her practice working with boards – particularly given ‘the numerous ways new technologies are impacting many corporations’ – she notes a shift around cyber-security awareness, in particular. Karaffa says many boards may have previously questioned the need for a cyber-security or data-privacy expert on the board if the organization was not in the technology sector or had a significant component of business in that area.
Today, however, boards recognize that their organization – at some point – will likely deal with a cyber-security or data-privacy issue and so have technology embedded within their businesses. ‘Over the course of the past two years, I’ve noticed an advancement in the way board members at least need to be able to understand, question and confirm that management’s technology strategy and risk-mitigation tactics in those areas are appropriate,’ Karaffa says. ‘Technological acumen is necessary for board service.’
Board culture is critical
Karaffa points to the knock-on effect of diversity on board culture, which she in turn describes as ‘critical’ in enabling a board to fulfill its fiduciary duties. ‘If you do not have a culture that fosters intellectual honesty and a curiosity that enables board members to challenge one another and their management team in a way that is productive, a board will not be able to achieve standards of excellence in the way it exercises its responsibilities,’ she says.
She notes that a board’s culture can be enhanced by increasing its diversity and having new personas in the boardroom, but this can create challenge and discomfort in embracing something new. Additionally, Karaffa indicates that as boards change their composition, they also have to assess whether they expect new members to fit into the old culture and adhere to norms of the past, or whether they are evolving their culture and enabling board members to maximize their impact. She notes that by recognizing how diversity works as a competitive differentiator, a board can benefit from freer thinking and foster greater innovation, all in support of driving greater value and growth.
‘Boards may benefit from advancing their culture by bringing in individuals who come from different backgrounds, were educated at different post-secondary institutions, have worked in different business environments or have lived in different parts of the world – those who may not fit within the mold of what the board’s culture has historically been,’ she explains. ‘Strategically developed composition and culture are co-equal partners in highly effective boards.’
Download the full Nasdaq 2023 Global Governance Pulse report to discover more insights about how boards view the board refreshment process, assess risk and oversee strategy and performance.
