An analysis of the performance of 500 companies around the world found a majority of directors (61%) believe diversity has a postive effect on performance. This includes diversity of skills, expertise outside of the firm's sector, international experience, age, background and gender.
"A more diverse board is better able to make quality decisions, simply because of the nature of the people around the table," said John Heaps, chairman of Eversheds.
The report, 'The Effective Board', analysed share price trends of companies in Europe, the US, Asia Pacific, the Middle East and Brazil between 2011 and 2012.
It found companies with smaller boards had stronger share price performance. Since 2007, the number of directors sitting on boards has dropped by 8% to 12.3 members.
A majority (93%) of board members believe an effective board should have fewer than 12 members. "A group of six or seven board members may be regarded as more capable of making quick and effective decisions," Heaps said.
Although smaller boards can deliver greater agility, they can also be less diverse. "Companies with a lack of diversity on their boards justify their decision [by citing] a lack of talent in the pipeline, but I don't buy into this at all," Heaps said.
"Boards today need to be even more aware of the issues they face in order to deal with difficult economic times. That awareness of threats and opportunities will be better achieved if boards comprise people from more diverse backgrounds."
The report found boards with younger members performed better; companies among the top 20% had board members that were 14 months younger than average.
Companies with the CEO sitting on the board also performed better despite the number of sitting CEOs declining in the past five years.
