How should we define diversity?
This brings us to our second problem: the notion of diversity itself. I’ll be the first to admit it’s not the most satisfying term. It’s frustrating that much of the conversation starts and ends with external characteristics, with little discussion of less observable characteristics. It’s hard to reconcile the desire to live in a world in which external characteristics don’t matter with the reality that they still do. It’s unnerving to imply differences are an end in themselves and that we’ve abandoned the pursuit of commonalities. It’s exhausting to feel like we don’t have the solutions and can’t solve the problem, even when we want to.
But we don’t need to fall into these traps. The case for diversity and inclusion isn’t that any singular characteristic makes a person superior at leadership to another. It’s simply that a continual absence of a characteristic that’s common among the population but nonexistent among its leaders should be cause for introspection. In some communities this might come in the form of gender or skin color or sexual orientation. In other communities it might come in the form of accent or caste. We’re not actually asking why the people in the boardroom aren’t more different from one another. We’re asking why they tend to be so different from the people in their community.
How should we improve diversity?
The limiting barriers that we face in the real world are no less arbitrary or damaging than the imaginary examples we’ve discussed here. It’s hard not to think they continue to exclude high numbers of competent and deserving human beings from consideration. This has real costs, even if those costs are hard to measure precisely and the term diversity doesn’t quite do full justice to our intentions.
Some are concerned that the NASDAQ listing requirement is too costly and unjustified. If anything it could be argued as pretty weak tea, since it comes with no actual consequences. It doesn’t force companies to take any real action to improve the diversity of the board—only to explain its absence. Even then the level at which that explanation is required is well below that found in the general population. In other words, many NASDAQ-listed companies can still carry on with business as usual, even if their boards barely mirror their communities at all.
But all isn’t lost. The value of the rule is to prompt introspection and make that introspection publicly available. If we return to our imaginary example, the worry isn’t whether every company has exactly the same proportion of left-handed leaders as found in the general population. Some companies might have more, and some might have less. The worry is when the gap is universal and large. This is simply the reality of US company leadership right now, and it seems clear it won’t change on its own.
This is an area where shareholders can play a major role. It’s an exciting time for investors to use their portfolios to move equity of opportunity forward. There are more tools available for just that purpose than ever before, whether they choose to use screens to own the leading companies or active ownership to encourage lagging companies to become better. One good place to start is by demanding better disclosure of company progress on diversity, just like the NASDAQ rule would provide, which can better inform investors’ proxy votes or engagement activity. But let’s not forget that disclosure is just a start, and true progress takes more time and more work.
The bottom line
The logic around diversity and inclusion should be straightforward, but it’s frequently misconstrued by both proponents and detractors. The case for diversity and inclusion simply recognizes that limiting leadership and decision-making to arbitrary subsets of the population is no way to run things, even if we can’t measure exactly how much it matters. It also recognizes that meritocracy doesn’t just naturally manifest—it requires continued attention at all levels and in all spheres.