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Most directors favour diversity of perspective over demographic diversity, such as gender or ethnicity.
Company directors are more interested in individual diversity or diversity of thought rather than demographic diversity in the boardroom, including functional diversity, according to a new study.
The report by the Financial Reporting Council is based on a survey of directors of FTSE 350 companies and finds that, while most do not see increased diversity or diversity targets as a threat to competence and creating value for the business, they do not see it as offering a business benefit.
Moreover, although ethnic and gender diversity are always mentioned, they are not high in the minds of directors when it comes to the types of diversity that they think of either first or as most important.
The survey showed demographic diversity including gender, ethnicity and nationality were emphasised by relatively fewer interviewees. The report’s authors say: “This suggests that individual differences are seen by directors as the most significant source of diversity in the boardroom, rather than demographic differences including gender, ethnicity and nationality.”
While few directors mention meritocracy as the basis for not appointing a diverse board, meritocracy was only ever mentioned by white men and was strongly negatively correlated with the percentage of women and minority directors on their board. The authors say this is evidence that only a small minority of directors use such language in the diversity conversation to avoid appointing a diverse board and that boards largely do not see demographic diversity or targets as a threat to the quality of directors.
However, the report notes that there are some types of diversity that are simply not on the radar screen of most boards, for instance, sexual orientation.
While the report shows that diversity is valued by FTSE-listed company directors, the diversity that they value most is individual differences, such as personality and neurodiversity – diversity of perspective and thought. It says: “Demographic diversity is neither seen as a threat to board effectiveness, nor does it appear to be seen as a primary means to achieve the type of diversity that leads to greater board effectiveness.”