The future of the workforce: Inclusion in corporate governance

Diversity in corporate governance has occupied a significant space, with the latest development being the adoption of the recent European Women on Boards Directive. Nevertheless, innovative governance should not only focus on diversity which is one of its many distinctive pillars. Indeed, there is a group of non-legal recommendations that aim to go beyond the representation of diversity and focus on inclusion. 

Academic literature has repeatedly demonstrated how diverse boards can perform better due to their broader perspectives. However, diversity, and thus the presence of individuals with different characteristics, is not a sufficient condition. Moreover, higher diversity can also lead to lower performance (Deloitte Development LLC., 2019; FRC, 2021). Socio-psychological research (e.g. social identity theory) shows that a higher degree of diversity could complicate general decision-making. This could be due to the emergence of certain boundaries between groups of directors or difficulties in communication and mutual understanding among them. GUBERNA (2019) therefore advocates diversity based on the needs of a company and their stakeholders.  

Based on this reasoning, we can state that the path to more diverse boards cannot be separated from creating inclusion and a feeling of belonging. The main difference between the two is that diversity refers to the presence of people with diverse characteristics, while inclusion refers to the practice of making all members feel welcomed and giving them equal opportunities to connect, belong, and grow – to contribute to the board, and feel comfortable and confident being their authentic selves. In other words, inclusion is a set of behaviors and can be ‘governed’ (Deloitte Development LLC., 2019; FRC, 2021). More than behaviours, inclusion is also a mindset; in other words, to make inclusion really work, one has to be inclusive, not do inclusive.

Recommendations to move towards inclusion are the following:  

  • Prioritise Culture: Invest in building an inclusive board culture. Spend time together outside meetings to build trust and understand each other’s perspectives may be a good starting point. Nevertheless, in order for such outside meetings not to result in a replication of ‘groupthinking’ dynamics, companies should consciously work on board cohesion, by actively debating/experiencing/ exploring the topic of trust and inclusion. If it’s not “building trust by design”, the reality may result in status quo being maintained at the expense of inclusion.

  • The culture must shift to embrace the new perspectives that diverse members bring (Randall et al., 2022; Institute of Business Ethics, 2020, The Ethics of Diversity). Nevertheless, focussing generally on culture may result in perfectible outcomes. It is thus important to consciously work with culture by defining, making explicit, assessing, evaluating, growing, and nurturing it within each company. A regular check-in on culture elements such as values, purpose, vision are thus key to create the necessary shifts. Inclusion, and similarly sustainability, will be realised to a lesser extent if it’s not at the heart of the organisation. And this starts with the board. In order to to leverage the full potential of a diverse workforce, the board will have to put inclusion on their agenda, including defining expressed behaviours, attitudes, etc. 

  • Collaborative decision-making: Inclusive boards exhibit a more collaborative decision-making process. Diverse boards with engaged directors tend to fully discuss differing viewpoints and reach a common understanding, leading to more unified decisions and ensuring no one’s voice is disregarded (Randall et al., 2022). 

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  • Compound Disadvantages: Directors from lower socioeconomic backgrounds face additional challenges in building trust and understanding the board’s culture and dynamics, making it harder for them to integrate (Randall et al., 2022). 

  • Select a chair who is a good listener: The chair should actively seek out and understand diverse perspectives, ensuring that all contributions are appreciated and valued (Randall et al., 2022). 

  • Empower sub-committees: Strong sub-committees help new directors understand the board’s politics, culture, and processes, allowing them to be more effective (Randall et al., 2022). Such committees should be carefully designed as they might default towards information hoarding and members might derive additional status from their membership, both leading to a potential higher degree of exclusion.

  • Look critically at the individual roles assigned to board members (Institute of Business Ethics, 2020, The Ethics of Diversity).

Diversity is a fact, yet companies find it hard to integrate because it requires a mindset shift towards inclusion. It is thus advisable to encourage inclusion, equity and belonging alongside diversity. The key to moving towards higher inclusion and integrating diversity is the modelling of desired behaviour, attitudes and mindsets by leadership. Hence the role of the board and their executive officers.

The workforce of the future will undoubtably create new dynamics in corporate governance, which companies will need to grasp and organically integrate to remain competitive and aligned with societal changes. Inclusion is the distinctive feature of innovative governance that will also help companies live up to workforce’s expectations.

GUBERNA would like to thank Emmanuelle Verhagen, Senior Partner at DUIN.partners for her collaborative work on this piece with the GUBERNA research team.