Is lack of diversity on a board of directors a signal of a company that doesn't value diversity? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Shefaly Yogendra, Board Director experienced with for- & non-profit, private & listed boards, on Quora:

It is worth considering who is likely to use the signaling from the make-up of a board of directors.

Investors are the first group who should watch the make-up of a board of directors, seeing as companies with at least one female board director deliver better return on equity and income growth, and those companies in the top quartile of gender and racial diversity delivered 35% better returns than their industry's mean. A homogeneous board of directors is really just signaling that it does not care for shareholder returns more than it cares for retaining their own jobs on the board.

Consumers should be another group that cares about the make-up of a board of directors. After all they buy the products, and make money for companies, and margins are under pressure across categories. Luxury and fashion are two segments which sell overwhelmingly to women, and yet are overwhelmingly owned and controlled by men on boards and in executive suites. Only an estimated 3% of creative directors in advertising agencies are women, a point often noted by Cindy Gallop, one of the most vocal activists in this space. This has begun to change somewhat in 2017. In this situation, lack of diversity merely signals that the company really does not care about its consumers, the very people who make them money and who make it possible for shareholders to realize meaningful or any returns whatsoever.

Employees are another group who may notice the signaling from a homogeneous board. In the UK, the Hampton-Alexander review has noted that only 25% of senior executive committees in FTSE 100 have women on them. This means there is no meaningful pipeline for board rooms either. This should worry employees about how the company views diversity - that is, not something worth the company's attention.

Corporate social responsibility monitoring groups and activists often also pay attention to diversity on boards of directors, and they are probably the group most likely to note that companies with homogeneous boards of directors really do not care about diversity and inclusion.

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