Diverse Decision-Making: How Diversity on Boards Can Help Organisations
June 7, 2019
2 min read
What's going on here?
Companies are starting to understand the benefits of having a diverse span of people at board level.
What does this mean?
The board of directors of a company is a group of people who decide the activities of an organisation, making the major decisions on company issues.
Historically, these senior management positions have been disproportionately low on female representatives. In a report of 350 companies across the UK and US, McKinsey (a global management consulting firm) found that, at board level, only 14% of representatives were female and only 13% were ethnically or culturally diverse.
While these statistics raise important issues of equality, companies are now recognising the business benefits of developing a diverse board.
Why should law firms care?
Diversity is a major talking point in big firms nowadays. With increased reporting requirements and more public awareness of the issues, companies (including law firms) are constantly issuing statements, setting targets and starting schemes to promote diversity in the workplace.
These actions are all commendable steps in the battle against the underrepresentation of certain groups in professional industries. However, for the firm itself, the benefits can go much further than this. In a recent diversity report by McKinsey, there is a statistically significant correlation shown between leadership teams that are more diverse and a company’s financial performance. The companies that had the highest numbers for gender diversity were 21% more likely to record higher profits than the companies without diverse representation. The findings went even further to establish that companies with ethnically and culturally diverse boards were 43% more likely to outperform less diverse companies.
These benefits have come as no surprise to the world’s biggest companies who have been focussing on increasing their diversity for years. The Fortune 500 companies (the 500 largest US companies) have women and minorities holding 39% of their board seats as they recognise the value that a diverse board can bring.
From this week, law firms in the UK have to submit their diversity data to the Solicitors Regulation Authority (SRA). The last set of data that the SRA collected showed that women made up 48% of all lawyers in law firms. However, when looking up the ladder of seniority it shows a different picture. At large law firms (with over 50 partners), only 29% of partners are female. This shows that at the higher levels, law firms in the UK still have some way to go.
While firms may consider promoting diversity as a matter of social responsibility, it could just be an essential element to their business success.
Report written by Idin S
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