There’s been much publicity around the issue of diversity in the boardrooms. Companies are under increasing pressure from shareholders and institutional investors to improve their diversity. They are also under pressure to improve their diversity, as the presence of diverse boards can show that a company is progressive which can improve its branding reputation. It also improves company culture by creating a more open and equal environment.

The evidence is inconsistent on the impact of diversity on boards. Many studies have shown positive results, but other studies have demonstrated that different types of diversity could have distinct impacts. Diversity in gender is, for instance, associated with the performance of a company when it comes to accounting returns but not for returns from markets. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.

It has also been proven that people who are considered minorities or tokens in a particular group are less likely to share their opinions or opinions when they don’t align with those of the majority. This may prevent cognitive diversity from bringing its full benefits. The age of a director will also impact the way they make decisions in the boardroom. Managers who are older are less likely to embrace innovative ideas and innovations than younger managers. This is referred to as the “selection biased” effect. It is crucial to include young directors on a board, and not just focus exclusively on gender diversity.