ISS Governance

Wherefore Diversity?

Board diversity has become a key priority for some of the largest investors in the world, since it serves as a measure of a board's openness and inclusiveness. Ultimately, boards and investors want to make sure that that the board nomination process is robust, and takes into account the most qualified candidates representing the market that the company serves. Therefore, lack of board diversity and lack of board renewal can only be seen as potential symptoms of a problematic nomination process. The end goal remains to have a qualified, engaged, and competent board. As such, a review of board compos ition from a diversity lens may help facilitate more in–depth discussions about the qualities a company seeks in its directors, and the process it uses for identifying the right members for its board.

Improving board diversity and board renewal can also help improve the overall skillset of the board. The timing for evaluating board composition from this perspective could not be more appropriate . Director skills relevant to some of the most pressing issues for boards today may be in short supply. A review of ISS Analytics data of Russell 3000 companies shows that risk management, government relations, academia, human resources, and social responsibility are the five least commonly cited director skills. At a time when cybersecurity, changing regulations, workplace misconduct, and climate change appear to be on the top of the agenda for investors and boards alike, many U.S. boards may be ill-prepared to face these challenges.