Pub. 9 2019 Issue 2

5 ISSUE 2. 2019 Advisor’s board diversity program for three consecutive years.” As part of the new guidelines, State Street will vote against the entire slate of board members on the nominating committee of any public U.S. company that does not have at least one woman on its board. There is, in fact, a strong business case for cognitive diversity. Stud- ies show that diverse groups or teams make better decisions than homogenous ones. Companies in the top quartile for gender diversity of their executive teams were 21 percent more likely to experience above-average profitability than companies in the bottom quartile, according to a 2017 study by McKinsey & Co. The study also found that compa - nies in the top quartile for ethnic and cultural diversity were 33 percent more likely to outperform companies in the bottom quartile. Both findings were statistically significant. “On the complex tasks we now carry out in laboratories, board- rooms, courtrooms, and classrooms, we need people who think in different ways,” wrote University of Michigan professor Scott Page in his book “The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy.” And not in arbitrarily diverse ways,” he continued. “Effective diverse teams are built with forethought.” Page differentiates cognitive diversity from “identity” diversity, which is defined by demographic characteristics like race, gender, ethnicity, sexual orientation and national origin. But striving for identity diversity, through characteristics such as race and gender, and the different life experiences and perspectives that result, can help boards and organizations cultivate cognitive diversity. Yet, Juvan says boards also need to gain insight into how poten- tial directors think and process information, which they can do by appointing them to advisory boards or working with them in other capacities. Banks that have separate boards for their depository sub- sidiaries, for instance, could use those as a farm system to evaluate candidates for the holding company board. “I think it’s about creating a pipeline of candidates well in advance of the time that you actually need them, and really getting to know those candidates in a deeper way… as opposed to thinking a year out that we’re going to have an opening and… [working] with a recruiting firm,” she says. “I don’t think it’s something that, even if you work with a recruiting firm, you should fully outsource to somebody else.” w Jack Milligan is editor-in-chief of Bank Director, an information re- source for directors and officers of financial companies. You can con - nect with Jack on LinkedIn or follow @BankDirectorEd on Twitter. There is, in fact, a strong business case for cognitive diversity. Studies show that diverse groups or teams make better decisions than homogenous ones.