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As companies become more global, one professor believes they must add diversity to their board to gain advantages over their competitors.
According to a new report from Seletha Butler, Georgia Tech Scheller College of Business professor, companies' boards of directors should be more inclusive, reflecting the demographics and composition of the global marketplace they serve.
Diversity improves the power of a board of directors for several reasons, according to the report, including the fact that it provides for the access and utilization of untapped talent in order to include the greatest variety of workers . In addition, Butler said women and minorities have greater independence from management, thus reducing the risk of management being self-serving.
Butler added that diversity on an organization's board of directors generates more information and gives a sense of positive corporate behavior.
Butler suggests that U.S. companies need to take action soon, as other countries already are implementing diversity protocols and policies that could leave American companies behind. While there are a number of ways to achieve diversity, Butler proposes regulatory reform as one step toward achieving it.
She argues for transparency regulations that require public filing disclosures, including information such as post-secondary degrees, international background or exposure, key highlights of the last 20 years of employment history and key current and past for-profit and nonprofit board service.
"Such regulations would enable consumers to assess the level of diversity of specific companies and to base their investment and purchase decisions on more complete information," Butler said.
In order to help companies increase diversity on their board of directors, Butler has developed her own multitier plan, which includes preparing early, post-secondary governance study and training, promoting from middle management, establishing an inclusive nominating committee, utilizing available diversity information, and being intentional and understanding of international actions on board diversity.
Butler's report was recently published in the Virginia Law & Business Review.