Michael Rossen is a Managing Director and Kay Brkic is a Senior Manager at Deloitte LLP. This post is based on a Deloitte LLP memorandum by Mr. Rossen, Ms. Bkic, Richard Levine, and Ian MacDonald. Related research from the Program on Corporate Governance includes Politics and Gender in the Executive Suite (discussed on the Forum here) by Alma Cohen, Moshe Hazan, and David Weiss; Will Nasdaq’s Diversity Rules Harm Investors? (discussed on the Forum here) by Jesse M. Fried; and Duty and Diversity (discussed on the Forum here) by Chris Brummer and Leo E. Strine, Jr.
The business case for board diversity is not new and may no longer be forward-thinking.[1] While organizations – and other parties – have introduced initiatives to encourage boardroom diversity, developing the next generation of board members is a persistent challenge for many business leaders.
Beyond current initiatives to increase boardroom diversity, organizations with subsidiaries are uniquely positioned to further diversify the board candidate pool.
As an example, organizations can place diverse executives onto their subsidiary boards. By providing this opportunity to their executives through a formalized policy, organizations can fill subsidiary boards with those that are interested in board service, and the executives can gain valuable experience of serving on a board that can be used as a steppingstone for longer-term board service aspirations should they wish. Putting such a policy in place also sets the stage to infuse diverse candidates into future parent board refreshment initiatives. However, this approach may not be as simple for listed subsidiaries that will have their own requirements for outside, independent directors.
