22 Hoosier Banker March 2015 Technology advances, demographic changes and globalization are impacting and disrupting industries at a breathtaking pace. Technology changes, for example, have enabled companies like Amazon, Apple, Facebook, Google, Netflix, Uber and others to disrupt industries and leave their competitors continuously scrambling to catch up. Demographic change is happening rapidly in the United States. One major shift is the tripling of the U.S. Hispanic population to about 127 million by 2050, helping create a country which will be majority-minority near the year 2043. These changes are creating a fertile environment for new ways to drive competitive advantage. Corporate directors have the leadership responsibility to govern, set the tone and ensure a solid strategy to navigate these changing dynamics. One of the key enablers to successfully navigating these dynamics and drive competitive advantage is to ensure that your board has the broad perspective, adaptability and strong leadership that is enabled by having a diverse board of directors. Diverse boards make stronger boards, enable better decisions and help companies better understand customers, employees, suppliers and stakeholders that are all becoming more diverse, technically sophisticated and more global every day. Diverse boards listen with a different ear, contribute based on different life experiences, and challenge and govern in ways that enable better performance. But please don’t take my subjective word on the case for board diversity. There are a multitude of studies with empirical data on how diverse boards outperform non-diverse boards. As an example, a 2012 article from McKinsey Quarterly ‒ “Is there a payoff from top-team diversity?”‒ cited a sample study that showed ROEs were 53 percent higher and EBIT margins were 14 percent higher, on average, for diverse boards. With all of the data on why diversity makes sense for boards, one would have expected to see a dramatic increase in the numbers of diverse board members over the past several years. Surprisingly this has not been the case. Over the last several years, there has been minimal improvement in board diversification. Currently from a gender and ethnic perspective, women and minorities make up about 30 percent of all Fortune 500 board seats, with women only making up about 18 percent of Fortune 500 board seats. This creates a tremendous opportunity for boards to gain an advantage by leveraging board diversity. So how does your board move the needle to gain this advantage? 1. Discuss/define what diversity means, and where diversity can be strategic. Diversity is defined differently by different organizations and, although the Securities and Exchange Commission passed a rule requiring public companies to disclose how they incorporate diversity into board selection, not Leverage Board Diversity for Competitive Advantage About the Author David Olivencia is a senior vice president at global IT solutions provider Softtek. He is a commissioner for Indiana’s Minority and Women’s Business Enterprises Division and serves on the board of directors for the Congressional Hispanic Leadership Institute in Washington, D.C. He earned a bachelor’s degree from Rose-Hulman Institute of Technology, an MBA from the University of Notre Dame, completed the Harvard Business School executive corporate governance program and earned a certificate of director education from the National Association of Corporate Directors. The author can be reached at 312-721-0828, email: david.olivencia@softtek.com. DIRECTORS / SENIOR MANAGEMENT
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