Promoting a diversity culture
Boardroom diversity brings valuable fresh insight. Yet, as Corinne Lamesch the chair of ALFI told the 8th January “Essentials – Luxembourg” diner, a culture change in how meetings are run is also required to maximise the benefits.
Boards drawn from different pools of expertise, geographies, genders and age groups perform better than their homogenous counterparts Corinne noted. Breaking through group-think enables preconceptions to be tested and new ideas considered. Yet appointing someone with a fresh voice is just the start, the board must also see the need to change and act accordingly.
Create a new dynamic
“No way am I a shy person, but if I am the only woman in a room I behave differently and feel less willing to come forward with my views,” she remarked. She highlighted the role of the chair in breaking through what at worst can be “boys club” behaviour. “The chair should watch out for body language of those who have spoken infrequently, as most often they will have something important to contribute but maybe reluctant to come forward,” she noted.
. The more a board is diverse along all the different dimensions there is a greater likelihood of new voices feeling empowered to contribute. As well as different personal profiles, teams need a range of professional experience including finance, legal, IT, AML, ESG and leadership skills.
Corinne pointed out that this was part of the logic of quota systems that work towards a minimum proportion of women being on boards. Norway has set the pace in 2005 with its requirement for a 40/60 female-male split, but the non mandatory industry pledges (such as the HM Treasury Women in Finance Charter in the UK) are also working, Corinne said. “Generally 30% of women on a board creates a tipping point in terms of influence and building a new dynamic,” she said. Having truly independent directors on boards is also important. This is required by fund industry regulators in the UK and Ireland, and similar moves are being considered on the European mainland.
Diversity in ESG
Yet even if you think a lack of diversity does not affect performance, there is chance your firm’s shareholders will take a different view. “ESG is on everyone’s lips at the moment, and a major component of the ‘G for governance’ is board diversity,” Corinne pointed out. Shareholders and clients might decide that having the same types of faces on the board is a sign of low governance standards. They may take this as encouragement to want to make a change.
“Boards set the tone from the top for an organisation, no more so with their respect for different points of view,” Corinne noted. By embracing all types of people with different backgrounds and skills, boards maximise the chance of success, particularly in Luxembourg's cross-border environment.