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There is a growing awareness among corporate leaders and investors that diverse boards help businesses better serve customers, consumers employees, communities and employees. Recent debates regarding gender and race-based equality in the workplace has also prompted state-level laws to increase and encourage corporate boardroom diversity.

Numerous studies have proven that greater board diversity is associated with superior company performance. The most notable of these studies is an article from 2015 by McKinsey report that revealed companies that were in the top quartile of diversity in race were 33 percent more likely to beat those in the bottom quartile and a study in 2016 which found that female board members are linked to lower earnings volatility as well as better stock liquidity and better investor perceptions of firm value.

These findings support the idea that cognitive diversity enhances board decision-making, and enhances the capacity of the board to effectively mentor and monitor management. The diversity of demographic characteristics such as race, age and gender, also helps create an inclusive and respectful culture in the boardroom. This fosters healthy discussions and open exchanges of ideas.

Functional diversity is a crucial aspect. This refers to the diverse types of experience and education that are brought to the board by the members. The presence of diverse functional characteristics, like the tenure of a board member and their education, increases the abilities of the board to recognize the cognitive resources of board members (like the skills and knowledge) which in turn improves the decision-making process of the board.

Boards must be proactive when it comes to diversity and employ a variety of methods to search for new members. The most important step is to make sure that directors are aware of the importance of incorporating diverse perspectives into boardroom discussions. Boards naturally encourage the discussion of different perspectives when everyone is aware of the benefits to the company.

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