Companies should aim for ‘cognitive diversity’ in their boards

MANY Singapore-listed companies recognise the need for board diversity, such as by having directors of varied age and gender. Beyond demographics, they should also pursue “cognitive diversity” – ensuring that their board members carry a good mix of knowledge, skill sets and perspectives.

The importance of cognitive diversity was highlighted in the 2025 Singapore Board Diversity Index developed by global advisory WTW, in partnership with the Singapore Institute of Directors and the Singapore campus of James Cook University.

According to the index, Singapore-listed companies are improving in traditional metrics of board diversity.

Of the 553 companies studied, 17 per cent had gender-diverse boards, defined as being between 30 and 70 per cent female. This is an improvement from the 2020 edition of the index, where only 8 per cent of companies had met this criterion.

There was also a better mix of long-serving and new directors – 17 per cent of the companies met the criteria for good diversity in tenure, a rise from 13 per cent in the 2020 study.

Interestingly, the study did not stop at demographics, but also sought to measure cognitive diversity. On this front, Singapore-listed companies showed even more progress.

For instance, 29 per cent of the companies had five or more domain knowledge areas represented on the board. This is more than double the 14 per cent result in the 2020 edition of the index.

More companies also had directors of varied industry expertise. About a third of the companies had five or more industry expertise areas represented on the board, up from 15 per cent in the 2020 index.

The study raises an important point – that diversity goes beyond pure demographics, into diversity of thought and acceptance of differing opinions. Meeting diversity targets therefore cannot be a box-ticking exercise.

Case in point: a male chief executive could technically raise his board’s gender and age diversity simply by appointing his daughter to the board. But such a superficial change would fail to add an independent voice to leadership discussions.

Tracking cognitive diversity can thus help companies ensure that their boards are truly equipped to keep the management in check and combat groupthink.

While the study shows progress, corporate diversity itself is still viewed with scepticism by some. Detractors question if setting diversity targets can actually raise profits – arguably the single most important objective of a company.

The relationship is indeed murky. Research by McKinsey previously found a statistically significant positive relation between companies’ profits and the gender and ethnic diversity of their executives. However, a 2024 paper later cast doubt on whether such a correlation actually exists.

“McKinsey’s studies neither conceptually nor empirically support the argument that large US public firms can expect on average to deliver improved financial performance if they increase the racial or ethnic diversity of their executives,” the paper warned.

The political climate in the US has further cast a pall on corporate diversity. Returning US president Donald Trump has issued executive orders to end diversity programmes in the federal government. Several prominent companies have rolled back diversity efforts, such as Meta – whose chief Mark Zuckerberg has called the corporate world “culturally neutered” and advocated for “masculine energy”.

But even amid the noise, it is notable how hard some companies are fighting to retain diversity policies. Retailer Costco, for instance, has fended off a proposal for the company to spell out the risks of its diversity and inclusion efforts, with 98 per cent of shareholders voting against the proposal.

Even if there isn’t a strong causal relationship between diversity and profits, it isn’t hard to see why companies would still want to strive for diversity. A more diverse slate of directors can ask tough questions, manage risks and figure out a company’s blind spots. This is especially important for family businesses, where the danger of groupthink is real.

Ultimately, corporate diversity isn’t just about skin-deep, feel-good efforts, but must come with a true variety of opinion and perspectives. Even if diversity efforts may not translate directly into profits, they still have vital outcomes that are worth pursuing.