Gender Diversity (Women) in the Board of Directors

Rating

Gender Diversity (Women) in the Board of Directors

Focusing on task achievement and performance outcomes is generally believed to distinguish male leadership, while focusing on interpersonal relations and work satisfaction are expected from female leaders. In the business sector, women like men have their own point of views, experience, and working style that differs to some extent from those of their male colleagues. Thus a question is: Does the presence of the female component in a company's Board of Directors affect the effectiveness of its corporate governance system?

Indeed the existence of gender diversity might impact the effectiveness of the company's corporate governance system in several ways:

1. DISCLOSURE AND TRANSPARENCY:
   Gender diversity increases the quality of board discussions and the effectiveness of communication, which ensures better information about the company's activities is provided to investors. It also enhances the board's capacity to supervise the process of disclosure and transparency.
2. STAKEHOLDER ORIENTATION:
   Female leaders are perceived to be somewhat more risk-averse and more other-oriented, so gender diversity in the board's structure ensures sending the signal that the risks which threaten stakeholders' interests will be considered. Therefore, the existence of female leaders with their stereotypical perceptions will affect stakeholders' expectations about the added value caused by having women in the Board of Directors.
3. THE EFFECTIVENESS OF THE BOARD OF DIRECTORS:
   Females behave differently than males with respect of attendance conduct. The possibility of having attendance problems is less with them than with men. Furthermore, the existence of a greater percentage of women on the board leads to better attendance conduct of male directors. Also boards with more gender diversity have more board meetings and more effective ways to manage the performance-related pay.
4. BOARD INDEPENDENCE:
   Historically females have limited experience in executive roles, so the presence of more women in the board can improve corporate governance by increasing the board's independence and thus enhancing the monitoring of executive decision making. Therefore, it could be said that the board's independence is a much more common characteristic when female directors are present.

A lot of studies confirm that having women in the board of directors will positively impact corporate governance systems' effectiveness, which makes board gender diversity an important corporate governance issue.

⇨ If you have any further information about how gender diversity affects corporate governance systems, please share it here.

References:
1. R.B. Adams, D. Ferreira, (2009), Women in the Boardroom and Their Impact on Governance and Performance, Journal of Financial Economics, vol.94, P. P. 291- 309.
2. Ø. Bøhren, S. Staubo, (2016), Mandatory Gender Balance and Board Independence, European Financial Management, vol. 22, No. 1, P. P. 3 - 30.

		Comments by date▼ Comments by rating Rating
		2 Gandhi Heryanto Management Consultant, Indonesia
	Other Forms of Board Diversity Than Only Gender Diversity of the board in only one form of diversity (gender; men and women) is not enough. Other variations such as social diversity (eg race / ethnicity, and age differences) and professional diversity are also important for increasing the diversity of perspectives represented on the board. If the diversity of perspectives of board members is obtained and assessed regularly, such board will be more effective. Other requirements to achieve board diversity is to have an egalitarian culture - which raises and appreciates different voices and opinions, integrates contrasting insights, and welcomes conversations even about diversity. So we'd better see diversity in many different ways - experience, age, ethnicity, gender to have a bigger positive impact on corporate governance systems.

		1 khadijah gumbi Analyst
	Diversity in the Effective Performance of the Board Indeed diversity - be it gender, racial, ethnic, religious, just name it, is quite relevant for effective decision making as well as better working ideas. The more diverse a board is, the more effective will be the results. We should continue to integrate cultural differences as well as diverse individuals in decision-making, because as the world moves deeper into globalization the best decisions will be made by diverse Boards.

		0 Mark Buzan Canada
	Is Diversity the Issue? This might not be the popular point but is diversity really the issue? If in the end, at least from a nonprofit board perspective, the experience is unfulfilling is changing up the race, gender, etc. then going to make any real difference? In the end you could end up having a diverse set of people there, but without a commitment to core principles. You can end up playing lip service just to dress up the issue.

		1 John Henry Project Manager, United States
	The Board, the Leadership, the Criteria.... The three most important considerations for a board of directors are Passion for the mission of the organization, Commitment to the purpose of the organization and Desire to improve the organization. Finding individuals with those considerations is more critical to a board than diversity. Why? Because without passion commitment and desire to improve, the board is just another meeting once a month. Without individuals who value the organization enough to commit their time, their talents and their service to it, the gender, race, religious creed, socioeconomic diversity of the board pales in significance. Diversity for the sake of diversity, is not of prime importance. Now, if your organization serves a diverse population, the board should be able to properly represent the population, if the organization serves a focused population the board should be able to meet that groups needs. Diversity is important, but it is not the prime factor in choosing your leadership team.

		1 Sam Cookey Jr CEO, Nigeria
	Diversity and Board Performance I agree with @Ghandi that a broad based, indeed strategic, approach to diversity is best. Accepting the more common differences attributed to the way men and women approach items, boards should consider the strategic capabilities of the directors. More than ever before the pandemic has shown that a board's composition needs to be ready to deal with diverse challenges, therefore requires a broader range of skill sets and strategic alignment.