Over the course of the last year, many businesses and organizations have recognized their lack of diversity. Harvard Business Review reported that “in a fall 2020 analysis of the 3,000 largest publicly traded U.S. companies found that just 12.5% of board directors were from underrepresented ethnic and racial groups, up from 10% in 2015. The report also found that only 4% of directors were Black, while female directors held 21% of board seats.”
As directors, management, and employees address the lack of diversity on their board, the co-op community has developed more and more research about the benefits of board diversity. From individual cooperatives sharing their success with building diverse boards to development organizations researching the impact of diversity on cooperative boards, the response has led to more diversity, equity and inclusion initiatives hoping to create more representative cooperative boards.
The growing need for more diverse cooperative boards has led to new research analyzing issues, needs, and benefits to creating a diverse board. Below, I will explore recent research revealing the benefits of diversity on boards.
Better Understand and Represent the Co-op Community
Diverse boards bring together more backgrounds, experiences, and ages to engage in the decision-making process. When directors better represent their member-owners, their decision-making can better reflect the cooperative members, emphasizing democratic member participation, the second cooperative principle. By bringing together directors with different geographic backgrounds, sexual orientations and genders, and/or races or ethnicities, among many other characteristics, boards that foster diversity better represent their community and make better-informed decisions for the cooperative and its member-owners.
Oklahoma State University’s Dr. Phil Kinkel found in “The Need for Board Diversity in Agricultural Cooperatives” that board diversity can help a board “relate to its internal and external stakeholders.” For example, women are an important part of the employee teams at cooperatives and “female representation on the board gives those employees a greater sense of connection with the cooperative and improves the perception of a career path.” Board diversity allows cooperatives to understand and serve both their member-owners and employees.
Better Change Styles
Another benefit of building a diverse board of directors is the advantage that the diversity of experiences and knowledge brings to change management. The unique perspectives that each director brings to the board room can help guide the cooperative through both low risk change and high risk change that may threaten the sustainability of the business.
Dr. Phil Kinkel has found that cooperative diversity led to better change management. In his study of gender diversity on agricultural boards, Kinkel stated, “[b]oards with greater gender and age diversity appear to make better decisions, particularly when dealing with strategic issues or organizational change.” This research pushes boards to think about how diversity of ideas and experiences can benefit the entire cooperative.
In a recent blog about the value of board diversity, Ohio State’s Fisher College of Business shared research findings indicating that by having more diverse human capital, companies can better navigate “disruptive change.” The study conducted in 2018 by Bernie, Bhagwat, and Yonkers found that the “aggregate skillset” and diverse experience on more diverse boards changed the outcome of more volatile changes in the company. By including individuals with a diversity of experiences, boards can lead better together through economic, business, and social change.
As recent research has shown, cooperatives have both a social interest and a business interest in building diverse, equitable, and inclusive boards and many cooperatives are approaching board recruitment and development with renewed focus on diversity, equity, and inclusion to build more representative and sustainable enterprises. Harkening back to the seven guiding cooperative principles, diverse boards better serve their members by staying true to the democratic foundations of cooperation.
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