Event Recap: OnBoard Co-Founder and CEO Paroon Chadha talks about the current state of diversity and why it matters, barriers to diversity, and how to break the cycle.
Motivated by the increased focus on diversity, equity, and inclusion (DEI) and new mandates, boards have moved quickly to bolster diversity and composition. Boards are now searching for new members and looking at racial and ethical diversity, gender diversity, age, and sexual orientation, in addition to different industry and operational experiences.
Aug. 22, OnBoard Co-Founder and CEO Paroon Chadha presented to Association leaders at the American Society of Association Executives (ASAE) Annual Meeting in Nashville, Tennessee, about diversity in the boardroom. He spoke about the current state of diversity, barriers to diversity, and how to break the cycle. At the end, he gave a playbook for implementing diversity within your organization.
Chadha says we’re in a Renaissance age. “Not only are we going digital, but we are also taking on some brand new topics that we’re usually left out in the boardroom, and diversity tends to be one of those topics.”
This post will recap his breakout session and help develop a framework for diversity within your board.
“The topics and the opportunities are actually requiring more discussion and more varied voices.”
ESG— Where Should We Be Focusing?
ESG (environmental, social, and governance) in the boardroom has drastically changed over the last two years, and now, more than ever, boards must focus on these issues. Chadha said boards should answer the question, “Where should we be focusing— board diversity, climate change, board composition, or privacy?” When determining this, you should look at 4 things:
- How important are each of these topics to your business?
- What’s important to your stakeholders?
- What’s important to your employees?
- What’s important to your customers or membership?
While many companies will want to dive right into the social issues, having a diverse board is the first important thing because different voices are required to solve all these issues. “None of us were classically trained to deal with any of these topics,” Chadha said.
Boards are increasingly dealing with human capital issues and taking a stance. A recent example is when the Supreme Court overturned Roe vs. Wade, and companies changed policies based on State reactions. They need to consider what matters to employees so they can retain them. Diverse board members will bring diverse perspectives to these issues and be a domino in creating change worldwide for diversity.
Why Diversity Matters
When asked, “What would draw more effectiveness at the board level,” the answer is often, “The board needs to be more engaged to get more done.” As we know from the book Death by Meeting, constructive ideological conflict is the way to make meetings less boring. This can be achieved by more board diversity.
If you’re having the same discussions and everyone in your boardroom agrees with each other, you can look at who’s in the boardroom and see if there’s enough diversity to produce constructive conflict. Contrasting viewpoints will automatically surface when you put more diversity in the room. This creates more engagement and can bolster your board’s effectiveness.
The Current State of Diversity in the Boardroom
The move toward DEI within boards has resulted in positive change. In 2018, California set a law that companies headquartered there must have gender-diverse boards. At the time, 33% of boards were male-only, and even though the California Supreme Court struck down those mandates in 2022, now only 2% are male-only.
But California is not the only state making progress. 43% of board seats at Fortune 500 companies are first-time directors, which are known for being diverse (many of those were filled by people with sustainability and cybersecurity experience), and women fill 45% of seats.
Across the S&P 500, 33% of board directors are now women, 22% are people of color, and 10% are women of color, which is an all-time high. However, this is not the case for private-sector companies, where only 14% are women, and 22% are people of color.
Barriers to Diversity
While progress has happened, there’s still room for improvement, especially in private and nonprofit markets, so how do we get there?
Chadha said we all have biases and tend to trust people who look like us. That’s why our leadership teams and boards have looked the same. “Now, with so much coming out, we are trying to change that because the topics and the opportunities are actually requiring more discussion and more varied voices.”
Below are a few barriers he identified.
Lack of Turnover at the Board Level
Many boards look the same, and if there’s no turnover, there isn’t an opportunity for new, more diverse directors to join. This happens when boards don’t set term limits. The average age of a publicly traded company board member is 64, and the age limit is 75, and they wait for voluntary step-offs or retirement to get new members.
The Way People Enter the Board Service
Traditionally, board members have been previous CEOs or had profit-and-loss responsibility, but that’s no longer always needed. Also, people need to break past their networks and agencies to find talent and recruit from different sources.
Not Using Annual Evaluations
Boards must use a board assessment or peer review to ensure non-performing members are moved out of the boards. Although it can be uncomfortable, peer reviews will uncover what everyone is actually thinking and give you answers for how to move forward.
Breaking the Cycle
So how do you break the cycle and get the diverse board you want? Below are 7 steps to move toward diversity.
- Capture and measure the current state. It’s vital to assess what skills, backgrounds, experience, and diversity you’re missing. Board software can map out collective skill sets and identify gaps.
- Look at your board’s refreshment plan. If you don’t have vacancies soon, see if there are board members who don’t want to finish their term so you can replace them with more diversity. You can also implement a mandatory retirement age or do a director peer review.
- Expand the governance structure. Add board seats, but don’t add one person at a time because it could be difficult for that person to carry the weight of being the only one from their color or race. Not only could that be construed as tokenism, but minority members need sounding boards. You can also outsource to a committee and make it part of their charter to see real change.
- Think about committee leadership. Rotate leaders and set goals like “we want to have 33% of this.” You can also link incentives to DEI goals.
- Leverage multiple sources of diversity. You can look for diversity in gender, age, race/ethnicity, professional experience, and board tenure.
- Set ground rules for inclusive collaboration during meetings. Set rules like “no interruptions except by the chair,” “confront in a respectful & non-threatening way,” and “think about unintended consequences of remarks before making them.”
- “Bake in” diversity via succession planning. Governance principles should be reviewed annually, and you should be using a nominating and governance committee. Complete a “clean sheet” assessment of diversity and skills every three to five years and strive for a mix of board tenures to aid board development.
Inclusiveness in Digital Meetings
Since Zoom doesn’t allow for sidebar conversations, it’s an equalizer because everyone has the same seat in the room, and you can have board members from different locations. “At the board level, the decisions are made as a group; the side conversation should not result in a decision,” Chadha said. “This is done really well in the Zoom environment.”
You may also need to develop new rules in the hybrid environment. If someone on Zoom wants to talk, you should let them because they may not know everyone else has moved on from the conversation.
It’s also vital to encourage minority board members to speak up and attribute credit when they make a good point.
Chadha also encouraged attendees to look at the ground rules annually because as new board members join, the dynamics will change, and you’ll want to ensure everyone has a voice.
Do you want to use digital tools to take your board to the next level? OnBoard exists to inspire and enable boards to do their best work. Get a free demo today.
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About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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