Leadership

The Importance of Diversity on a Community Association Board of Directors

Underrepresentation of Black professionals on boards of directors in corporate America has been persistent.

In 2019, more than a third of S&P 500 firms had no Black board member, and Black directors comprised only 4% of Russell 3000 Index board members. A recent issue of Harvard Business Review reported a study of U.S. boards that found that barriers blocking Black directors include recruitment and onboarding and access to board leadership roles. Another hurdle is the dynamics in which contributions of Black directors, particularly women, are ignored or undermined.

That same study also points to the substantial benefits of a diverse board, including diversity of perspectives and encouragement of diversity throughout the organization.

This study comes amid a recent NASDAQ proposal to the U.S. Securities and Exchange Commission to adopt new listing rules regarding board diversity and disclosures.

NASDAQ’s proposal calls for companies trading on its platform to publicly disclose statistics on board diversity. The proposal includes a requirement that companies on its platform have at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+. With this proposal, NASDAQ hopes to push companies toward diversity and inclusion in their corporate governance.

Last summer, Alexis Ohanian, co-founder of Reddit and the husband of tennis star Serena Williams, stepped down from his 15-year position on the board of directors to allow a Black candidate to fill his seat. His actions sent a strong statement about the importance of diversity and the importance of Black representation in these high-level positions.

With a constantly evolving environment and a diverse membership base, community associations should strive for corporate governance that adequately represents their membership. As community associations face complex decisions affecting operations and risk management, a diverse board of directors can be a source of strength. A diverse board can do much more than “check the box.” It can expand the knowledge, experience, and insight that go into a community association’s decision-making, and it can ultimately lead to both an improved community culture and community growth.

Community associations should aim for multi-dimensional diversity that includes variables such as race, ethnicity, sexual orientation, age, gender, religion, professional and personal experiences, and skill sets.

Several studies have found a correlation between a diverse board and improvements in financial performance and governance.

Diverse boards of directors bring a valuable range of outlooks, opinions, and suggestions regarding decision-making and problem-solving. More dynamic approaches help to deconstruct tight-knit or narrow decision-making processes to which community associations might be accustomed, leading to improved and more inclusive community governance.

A board of directors with members from different lifestyles can offer more progressive insights and approaches than otherwise might have been accounted for. Growth that can follow from diversity and inclusion can contribute to stronger communities and involvement by the members.

There is value in maintaining an intentional and continuous commitment to diversity by ensuring that boards are representative of the members they serve.

But what about those who say that differing opinions and outlooks could lead to extended discourse, conflict, and even hostility in a community association?

A diverse board of directors can still be amicable and work in a collegial setting. Differing outlooks do not have to result in discord. They can serve as an opportunity for expanding viewpoints and collectively coming together in the decision-making process for the community’s benefit.

A board with diverse professional and personal backgrounds can actually bring added conflict resolution experience to help resolve disagreements that may arise. A community association may be in a better position to tackle difficult issues if its board members have varying viewpoints that allow for robust discussions.

With diversity at the forefront, community associations would do well to take an expansive and detailed look into the composition of their board of directors and consider initiatives to increase diversity among board members.  Board diversity can open a path to more inclusive and collective community association governance, positively impact a community’s culture, and help keep pace with a constantly changing membership base.

 


By Tiffany M. Releford, ESQ.

 Tiffany is a partner at Whiteford, Taylor & Preston and co-chair of the Community Associations group. She focuses her practice on community associations in the District of Columbia, Maryland and Virginia. In addition, Releford routinely counsels community associations in covenant enforcement, revising and amending governing documents, transition from developer to owner control, warranty claims, and collection of delinquent assessments.