Diverse Boards: Do They Deadlock More?
May 17, 2018
It’s the new corporate board ideal, a board composed of directors of all different ages, ethnicities, and genders, each with unique expertise to help guide the organization to new heights.
But for all the good a diverse board can bring, a new study by a trio of professors says that it can have a surprising—and serious—side effect: corporate deadlock. Indeed, some of the most diverse boards wind up not implementing any new policies at all, according to a controversial new study. The insights that diverse, independent directors have as individuals don’t always gel into a cohesive board. “Heterogeneous director biases do not cancel out,” according to Deadlock on the Board, a new study from professors at Washington University in St. Louis, Boston College University, and Columbia University.
Deadlock already is a common issue in boardrooms. Two-thirds (67%) of directors report the inability to decide about some issues in the boardroom. Worse, 30% say they have encountered a boardroom dispute that threatens the very survival of the corporation. Deadlock can lead to entrenched management and other problems for the organization, as well. But the idea that a diverse board can exacerbate deadlock is not something many directors may think about.
That said, boards should not use a fear of deadlock as an excuse to keep their boards looking and sounding the same, says Nels Olson, vice chairman of Korn Ferry and co-leader of its Board & CEO Services practice. “The alternative to diverse views is groupthink,” Olson says. Other reasons for deadlock on the board include how long directors have been on the board and whether shareholders elect directors all at once or on staggered terms.
There are ways any board, diverse or otherwise, can avoid deadlock. The chair (or lead director, if it’s a different person) must create a boardroom culture that promotes healthy and rigorous debate but which will ultimately lead to a resolution, Olson says. “Boards tend to be conservative and risk averse, so you have to have leaders on the board, starting with the chair, who push for debating and avoiding deadlock,” he says.
Besides the culture reset, boardrooms can avoid paralysis if the directors are all aligned on a clear set of objectives. “There are many boards that haven't done the work necessary to arrive at an objective decision,” says Jane Stevenson, Korn Ferry’s global leader for CEO Succession and vice chairman of Board & CEO Services. “Whenever you are in a subjective zone, deadlock can happen more easily.”
Four years ago, Stevenson worked with the board of a company with a diverse set of businesses, and the directors had no idea which businesses to expand, which to maintain, and which to sell. “The board couldn’t come together on decisions because every member was coming at things from a different context.”
Now, she says, the board members are working well together. “What changed? They aligned about the strategic priorities that would define success.” Once that was done, a group of diverse directors quickly agreed on what moves the firm should make.