FRC calls for active inclusion to improve board diversity and effectiveness

The Financial Reporting Council has published a research paper, Board Diversity and Effectiveness in FTSE 350 Companies, in conjunction with London Business School, Leadership Institute and SQW, which shows that the effort to diversify boards pays benefits in terms of boardroom culture and performance. To maximise these benefits boards should recognise that change takes time and that diversity without active inclusion is unlikely to encourage new talent to the board.

The main findings of the research are that:

• the Chair of a board is responsible for driving inclusion;
• regulators and companies must focus on collecting more data on the types of diversity, board dynamics and social inclusion;
• the Nomination Committee itself should be diverse and have a clear mandate to work with search firms that access talent from wide and diverse pools; and
• the greater representation of women in the boardroom is reshaping company culture and dynamics which it is argued provides social as well as performance benefits for businesses.