According to Entrepreneur, it may be more important than ever to have a diverse board of directors. In 2021, the Securities and Exchange Commission approved a Nasdaq Diversity Rule, mandating that any company listed on the Nasdaq was required to have at least two diverse board members. Companies that failed to meet this requirement needed to be prepared to explain why. Even with the mandate holding companies accountable for the makeup of their boards, companies will likely find that having a diverse board of directors can have many benefits.
As the co-founder and CMO of two publicly traded companies — Hempacco (HPCO) and Green Global International (GGII) — Jorge Olson knows a thing or two about forming a diverse Board of Directors. Both of his companies were founded on the basis of what a diverse perspective can bring to the business world. Olson himself is a Mexican immigrant who grew up in an environment with no electricity or running water.
“At first, my solution was to go to school and be a CEO. I know, a long shot for a kid growing up in Barrio Cuatro in Tijuana, but in my brain, the way out was to be a CEO,” Olson told Medium, “The poles to bring electricity to the house cost $1,000 each, and I also had to pipe water in as well as pavement for the ugly dirt street. When the minimum wage is $60 per week in Mexico, I figured a CEO could make enough money to bring utilities to the house.”
Olson’s career trajectory has brought him lightyears away from that bare-bones existence from which he started. Now, he takes a diversity-positive approach to building his partnerships and the boards for his two companies.
Why a diverse board is important
We hear a lot about diversity in business, but may not fully understand why it is crucial to business success. To discover the benefits of a diverse Board of Directors, one must first look at the ever-shifting role of the board.
The Board of Directors’ primary role is to represent the interests of shareholders. The board can also provide guidance for the company on management issues, decision-making, or direction for the company’s future. The role of the board in and of itself illustrates why diversity within the board is so important. Without diverse representation, the interests of shareholders of diverse backgrounds will not be adequately represented. Likewise, the direction of the company is unlikely to serve a diverse base if there is no diverse representation among decision-makers.
Consumer and entrepreneurial behavior has changed in the past decade, with a focus on diversity, equity, and inclusion (DEI) becoming a priority for those who patronize businesses and those who start them. Modern boards need to reflect the target market of businesses and the modernized business environment that embraces DEI initiatives.
Olson’s Hempacco, for example, has partnered with a number of diverse personalities for their various product lines, including Snoop Dogg, Cheech and Chong, and Rick Ross, to reach a more diverse customer base. That diverse customer base needs to have equitable representation on the Board of Directors, so their needs, interests, and desires for what they would like to see from the company are properly addressed.
The benefits of a diverse board
In the past few years, businesses have been held accountable for a lack of DEI. With the societal upheaval that came with the pandemic and a civil rights movement that reached a fever pitch in the summer of 2020, businesses with diverse boards directing their decisions and future planning fared better, per a 2021 report. The report cites the “broad range of perspectives” on the more diverse boards as beneficial to the businesses seeking to ride the wave of economic downturns, societal change, or even unprecedented events such as the pandemic.
The world is forever changing — new ideas are developed and new ways of doing business are brought to the table — and as it does, so must companies’ leadership and Boards of Directors. When there is diversity among board members, businesses can have a competitive advantage over businesses with less diverse boards. The variety of knowledge, experience, and world views brought by the diverse board members make for a stronger business overall.
Sourcing a diverse board
Once you know the benefits of building a diverse Board of Directors, how do you source diverse board members? The first approach is to define your business goals and values.
You want to ensure that the board members you select have values that align with your business. If you are committed to DEI initiatives and approaches, this needs to be clear as you search for board members.
Olson focuses on setting a good example, and being a lighthouse for attracting diverse personalities to his businesses. “The purpose of my life and passion is to change the world by providing the spark that others can ignite into a blaze,” he explains. “I want to do this by providing an example and a roadmap through my companies.”
Search committees and approaches should be diversity-focused, and it should be a top priority for any potential board appointment. Once your diverse board is in place, it’s crucial that each board member is given the opportunity to be fully seen and heard. Board appointments cannot just be checking a diversity box, they need to be meaningful and advantageous to the goals of the organization.
As the world of business changes, and the diverse makeup of decision-makers and leaders become more important, businesses and organizations will need to begin to structure their Boards of Directors to reflect these changes.
