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:
- 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.
- 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.
- 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.
- 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.
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.
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