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November 05, 2002
Connecticut Initiative Promotes a Better Bottom Line Through Diverse Boards
by Willliam Baue
The Connecticut Board Diversity Initiative cites academic research to document the positive
financial value of diverse boards of directors, in addition to their social value.
SocialFunds.com --
The new corporate governance
standards at the New York Stock Exchange
(NYSE), currently awaiting approval from the Securities and Exchange Commission (SEC), require
listed companies to achieve a majority of independent directors on their boards within 24 months.
The next two years will therefore be filled with recruitment activity as companies seek individuals
qualified to sit on their boards. Seizing this opportunity to promote greater board diversity,
Connecticut State Treasurer Denise L. Nappier announced late last month the launching of the
state's Board Diversity Initiative.
 "There is an historic and unprecedented opportunity for
greater diversity on America's corporate boards," said Treasurer Nappier, who is the principal
fiduciary of the $18 billion Connecticut
Retirement Plans and Trust Funds (CRPTF). "With hundreds of corporate boards looking to add new
members, there is a real chance, as never before, to add diversity to the board room and new
strength to the bottom line."
By design the Initiative promotes a progressive social
agenda of cultural diversity. But it simultaneously fuels the good old-fashioned profit motive, as
evidenced by research that shows diverse boards enhance the bottom line. Recent academic papers
from Oklahoma State University, the University of Delaware, and Florida A&M find positive
relationships between a company's market value and the diversity of its corporate board and
upper-management.
"It has been shown that added diversity and independence helps a
company's bottom line, and increasing diversity in the boardroom to better reflect a company's
workforce, customers and community is ultimately in the best interest of shareholders and our
economy," Treasurer Nappier said.
The Initiative seeks to inform companies about the
value of diverse boards and to promote greater diversity on boards that currently lack it. It also
intends to educate individuals who fit a broad definition of diversity (including not only gender
and ethnicity but also sexual orientation and disability, among others) about opportunities to
serve on boards.
The Initiative gathers many different voices from the business
community in Connecticut. The member-organizations include the Connecticut Business and Industry
Association (CBIA) and the regional chapter of the National Association of Corporate Directors
(NACD), among others. The Initiative has also welcomed into its fold member-organizations of an
existing project promoting diversity on non-profit and public boards, "Reflecting
Connecticut/Reflejando a Connecticut". These organizations include the African-American Affairs
Commission, the Puerto Rican Affairs Commission, Democracy Works, and the Permanent Commission on
the Status of Women (PCSW).
 According to a 2001 PCSW survey, the Board Diversity
Initiative has its work cut out for it, as almost half (49 percent) of the top 100 public companies
in Connecticut had no women on their boards.
"We have a particular problem with small-
and mid-sized companies being less diverse," CRPTF Assistant Treasurer for Policy Meredith Miller
told SocialFunds.com. The Initiative therefore specifically reaches out to promote diversity at
these companies.
Perhaps the most important function of the Board Diversity Initiative
is to serve as a template and an incentive for other states.
"This is like [the saying
from the Kevin Costner film Field of Dreams]--'If you build it, they will come'," said Ms.
Miller.
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SRI World Group, Inc. All Rights Reserved.
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