The Handbook of Board Governance, 3rd Edition

26A CPA’s Primer on EDI: What Directors Should Know About Equity, Diversity, and Inclusion Audits

Romi-Lee Sevel, MFAC, CPA, CA

Assistant Professor, Professional Accounting, School of Administrative Studies, York University

Introduction

Educated boards of directors are undoubtedly familiar with the importance of diversity in board composition. Preparing a skills, competencies, and characteristics matrix is a well-recognized practice for achieving optimal board composition and avoiding groupthink. But do boards consider diversity throughout the whole organization and its value chain? Do boards contemplate whether the organization adheres to best practices in equity and inclusion? Do boards define these concepts appropriately? Have boards considered undergoing a voluntary equity, diversity, and inclusion audit?

This chapter provides an overview of equity, diversity, and inclusion and may be useful for directors who are contemplating taking stock of their current practices. The chapter also describes various approaches to equity, diversity, and inclusion audits and suggests how directors may prepare for them.

Human Capital

Human capital is one of the most important assets of an organization. It is an intangible asset that is undeclared on a balance sheet (due to GAAP restrictions); however, it drives immense organizational value.

Human capital comprises the talent and expertise at various levels within the organization that steers its course and drives other functions. Without ...