'A diverse group brings more experiences to bear - each member is attuned to certain risks; each assesses risks differently.'
TweetShareShare Boards play a critical role in the oversight of risk: helping management identify, assess, mitigate and manage risks. A diverse board of directors is essential for boards to fulfill this role effectively.
Diverse perspectives enhance risk oversight. To perform this role well, boards need directors with many different perspectives sitting around the table. A diverse group brings more experiences to bear – each member is attuned to certain risks; each assesses risks differently. Each has credibility on certain topics, and brings a unique ability to communicate concerns, making it easier for management to truly hear.
If you’re a student of lean principles, you know that the root cause doesn’t emerge until after you’ve asked why five times . In a board setting, airtime is limited, and it is rare to get four follow-up questions. It’s far easier to get the full story when multiple questioners pile on. Personal ‘inherent’ attributes – gender, race, ethnicity, age – are sometimes easier to observe . Diversity in these areas makes a breadth of perspective more likely, but does not insure it. In my opinion, inherent diversity is a necessary but not sufficient prerequisite for full diversity of perspective.
But there are drawbacks to the all-CEO board: Do they have time to devote to the board? Is functional expertise crowded out? Are they too deferential to the CEO? CEO directors can fall into a trap of treating the CEO as they wish to be treated. Functional leaders from the C-Suite, such as CIOs or CFOs, succeeded in their careers by advocating for issues and challenging their CEOs. They often bring this constructive challenge to board discussions.
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