Diversity in boardrooms has been an ongoing topic. Companies are under increasing pressure from institutional investors and shareholders to improve their diversity. A diverse board can demonstrate that a business is advancing, which can enhance the reputation of the brand. It can also help improve company culture by creating more open, equal environment.

However, the evidence regarding impact of diversity on boards is mixed. Numerous studies have found positive effects, however some studies have shown different effects. For instance, associated with the performance of a company in accounting returns however, not returns on markets. It has also been found that functional diversity, such as a mix of educational, industry/sector-specific and role-specific experience, improves board effectiveness by better managing external dependencies and challenging managerial assumptions.

In addition, it has been found that minorities or tokens within the group tend to self-censor by not sharing their beliefs and opinions when they are in conflict with the majority of the group. This may prevent the full benefits of cognitive diversity from being realized. The age of a director can also influence the way they make decisions in the boardroom. Managers who are older are less likely to adopt new ideas and make changes than younger managers. This is known as the “selection bias” effect. This is why it’s important to include young directors in the board and not evolution of corporate governance only focus on gender diversity.