Pub. 9 2019 Issue 2

4 www.azbankers.org One Strategy to Improve Board Performance By Jack Milligan, editor-in-chief for Bank Director Does greater diversity improve the performance of corporate boards, or is it just an exercise in political correctness? C OGNITIVE DIVERSITY — ALSO CALLED DIVERSITY OF THOUGHT — HAS PARTICULAR RELEVANCE TO BANK BOARDS OF DIRECTORS, WHICH ARE OVERWHELMINGLY MADE UP OF OLDER WHITE MEN WITH GENERAL BUSINESS BACKGROUNDS. This is not an indictment against older white men per se, but rather a recognition that a group of people with similar backgrounds and experiences are more likely to think alike than not. The same could be said about other homogenous social groups. For exam- ple, a team of older Latinas or younger black men might also be subject to groupthink. “We’re only going to get the right outcomes if we have the right people around the table,” says Jayne Juvan, a partner at Tucker Ellis who is vice chair of the American Bar Association’s corporate governance committee and frequently advises corporate boards on governance matters. It would be a mistake to dismiss board diversity as a political issue pushed by feminists, LGBT advocates and progressive Democrats. Even some of the world’s largest institutional investors think it’s a good idea. In his annual letter to chief executive officers in 2018, BlackRock CEO Larry Fink said the investment company would “continue to emphasize the importance of a diverse board” at companies BlackRock invests in. These companies are “less likely to succumb to groupthink or miss threats to a company’s business model,” he wrote. “And they are better able to identify opportunities that pro- vide long-term growth.” State Street Global Advisors, another big institutional investor, announced in September of last year that it will update its voting guidelines in 2020 for firms that have no women on their boards and have failed to engage in “successful dialogue on State Street Global