IMHO: Benefits of board diversity

A recent stocktake by the Ministry for Women shows women hold 53.9 per cent of public sector board roles. Women have now held 50 per cent or more of public sector directorships for four straight years.

This is something to celebrate. In the past, women have been underrepresented in New Zealand boardrooms. Today, the gender equity we are now seeing in the public sector is mirrored by a (slightly slower) trend in the private sector, and by changes we are observing at the Institute of Directors (IoD).

And it is not just more women making their way onto board. There is a shift to more diversity of thought and experience generally, as the value this brings to decision making becomes widely recognised.

The proportion of public sector directors who identify as Māori (27.5 per cent in 2023, up from 26.8 per cent in 2022) or Pasifika (7 per cent in 2023, up from 6.1 per cent in 2022) has continued to grow. There was no change over the past year in the proportion of public sector directors who identify as Asian (6.1 per cent).

At the IoD, we are seeing changes in our membership. The percentage who identify as female, while flat in 2023 from 2022 at 36 per cent, has been on a consistent upward trend of around a percentage point a year for the past five years. In 2023, 9.4 per cent of our members identified as Māori, up from 8.6 per cent in 2022, while 2.4 percent identified as Pasifika, little changed from 2.3 per cent a year earlier.

These are small but significant changes because they represent longer-term shifts in the governance community. This really does bode well for the success of New Zealand boards and their organisations. Diversity of thought and perspective, when it exists in a truly inclusive board culture, improves business performance and innovation.

While I celebrate the success of women directors coming onto public sector boards it should not be seen as the end of a journey.

You can’t view diversity through a tokenistic kind of lens, and expect to see benefits in board decision making. Diversity is not an end in itself. It creates space for robust discussions, increased knowledge and expertise at the table. It enables a contest of ideas that help boards avoid unintentional bias.

Research conducted by the Stanford Graduate School of Business on corporate governance lists potential benefits as:

• Improved decision-making by ensuring the board has full array of knowledge
• Overcoming tendencies toward ‘groupthink’ and premature consensus
• Embedding an important social value that is consistent with ‘equality’

Diverse companies are 70 per cent more likely to capture new markets, according to the Harvard Business Review. Diverse teams are 87 percent better at making decisions, according to Forbes. New Zealand studies suggest diverse organisations are more successful at retaining talent, more likely to innovate, and that boardroom diversity strengthens corporate social responsibility performance,

Surely that’s proof enough to illustrate why difference and diversity at the table is beneficial.

For many years the IoD has been a strong supporter of ensuring there is a diverse pool of governance talent available to businesses and organisations. We do this through a range of programmes including Mentoring for Diversity, our Te Kākano project to explore and increase understanding of governance through a Māori perspective, and workshops and discussions through our Pacific Advisory Group.

In response to feedback from our membership, we launched a Women Directors’ Network in 2023. There was a widespread feeling (72 per cent of survey respondents) that women-only events could provide a valuable informal mentoring network for new and existing directors.

As a woman in governance, chief executive of the IoD and the current chair of the Global Network of Director Institutes (which represents more than 150,000 directors worldwide) I am pleased to see New Zealand is making progress in this space and I look forward to seeing the diversity in our governance community increase further over time.