Bias and the Board

Bias [ˈbīəs]

Prejudice in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair.

"There was evidence of bias against foreign applicants."

Board Bias [bôrd bīəs]

Prejudice in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair, which results in a deterioration of governance best practices and is a detriment to shareholder value.

Yes, it’s true I made up that second definition But after reading the existing research on the effects of various types of bias on decision-making, the threat to board governance is clear Bias can erode corporate governance standards and processes specifically put in place to ensure independence and objectivity Even when a board has separate committees for nominating, governance, audit, risk, and compensation, keeping those committees functioning properly requires taking bias concerns seriously Since boards represent the shareholders of the organization, their decisions cannot be made lightly Important ideas and initiatives are expected to be objectively assessed: information gathered, experts consulted, data reviewed, and perspectives debated before recommendations are voted on If objective measures are not taken for decision-making, and sometimes even when they are, bias comes into play When bias enters the process, decisions can more easily be influenced by conflicts of interest, peer pressure, deference to authority, reliance on unconfirmed data, and personal unconscious bias These various biases can impair even the most well-intentioned and responsible board

In the past, one root of implicit bias has been a lack of diversity in the makeup of the board

In an earlier column, I noted that many countries and a few U S states passed quotas for female corporate directors, greatly increasing gender diversity at the board level But many boards still suffer from a lack of diversity In 2019, Black Enterprise reported that 37 percent of S&P 500 companies did not have a single Black board member, down from 39 percent in 2018 Since the sum total of the board’s experience is a significant persuasive influence on critical board conversations, having diversity of thought and experience when choosing independent board members is one way to help mitigate some of the bias risk While bias may still exist, it is diluted, less of a laser with only one focus, and more of a kaleidoscope of ideas and opinions While it might seem counterintuitive that a wide array of different and sometimes dissenting opinions leads to better decisionmaking, research shows that organizations with greater ethnic, racial, and gender diversity saw higher financial returns My guess as to why is that diversity leads to more creative problem-solving, fewer blind spots, and more innovation Based on my conversations with fellow board p broader pool of cand and diversity to orga example of how to thoughtful initiatives

Here are four of the affect decision-mak actions I suggest to

Attribution bias: You of others without any motivations to your o

ACTION: Work on the benefit of the as generous and prevent misunderst communication take If someone is late to remind yourself tha not intentional or d motivations allows y yielding better board

Anchor bias: You re gathered when mak view following inform

ACTION: Understan basing too much of that you need to ve mentioned in negoti Board members sho about all the relevan

Confirmation bias: Y supports your belief

ACTION: The board when making decisi because you disagre as successful ones a

Groupthink: You fee or disagreeing with you say nothing or you look for those th

ACTION: Energetic d not something to be and question the sta uniform agreement i

As many opportunit there are even more that is key to the board s efficacy can break down entirely if bias creeps in Understanding and confronting bias allows boards to identify where their decisions could go awry While confronting bias can be uncomfortable, just as self-awareness builds an individual’s character, honesty about interactions at the board level can build a stronger and more effective team, adding value to the organization and its shareholders

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Featuring: 2020 Women to Watch Award Recipients

Keynote Presentation by: Dara F. Castle, CPA Managing Par tner, RSM US LLP, Washington Metro Of fices

Elizabeth Pittelkow Kittner