Is your Board Diverse?
Do you remember the FedEx commercial where a team sat around in board room dumbstruck by a picture of a box and an arrow pointing to some far off destination? The team was not sure how to get their product to the customer. This was a simple problem that logistically could have been very complex. The answer was to call FedEx. The point is, that without a different perspective in the room the team can suffer from limited or homogenized views with few opportunities. It is in diversity that different perspectives and capabilities appear and the idea of emergent capacity takes hold. That is why it is important to look at diversity and its potential value in the competitiveness of a board of directors.
There are conflicting arguments debating if women on a board make a difference to the success and growth of an organization. The literature does agree with the correlation of organizational size in relation to the percentage of women on a board. The debate continues because it not clear if women are placed on the boards of larger companies for altruistic reasons or for real competence. However, the notion of token appointments are mostly rejected. The condition for women to gain competence through progressively higher appointments is also a constraining factor for competence.
Hyland and Marcllino (2002) found a “statistically significant correlation between the revenues [company size] of the organization and the number of female directors” (p. 27) while Bradshaw, Murray, and Wolpin (1996) determined that “women as board members or as CEOs had no relationship with reported organizational effectiveness [functional performance]” (p. 250). But firm size plays a role in these studies so Carter, Simkins, and Simpson (2003) accounted for both firm size and industry and looked at return on assets to understand firm value with results that suggested “firms with minority directors have greater value” (p. 51).
Noted authors on Emotional Intelligence for leaders talk about the key attributes of primal leadership. Under the category of social awareness: empathy, organizational awareness, and service (Goleman, Boyatzis, & McKee, 2002) are natural attributes to the female mind. Psychologist Serge Ginger gives a great talk on the neurological, emotional and cognitive differences in men and women that supports social awareness noting, “on a biological level, men are programmed for competition, while women are programmed for cooperation” (Ginger, 2003, p. 141).
Regardless of the different methods used to come to their findings, scholars tend to agree that the diversity and intrinsic capacities of women play an important role on a board, even increasing the amount of work that gets done and organizational satisfaction. But it is not just the diversity in male and female brains that makes a difference; there is good reason for ethno-cultural diversity as well.
The regional and national levels of diversity matter in gaining competitive advantage on a board. The advantage comes from unique perspectives including ethno-cultural diversity which is even more critical in a globalized economy. I’ve already made a case for women which make up about 50% of any population. But diversity also exists in cultures. For example, Canada has about 20% foreign born population (the US is about 13%). Recent immigrants to the Canadian population are primarily Asian, making up over 55% of new immigrants (Statistics Canada, 2013). With such an emphasis on trade and with high immigration levels, one could gain clear value from the contacts and perspectives of having a board with at least 20% culturally competent and 50% gender diverse members.
In this article I looked at some thoughts around board diversity and the value of inclusion. What I believe is important is not quotas, but finding the value of diversity on the board. That might mean understanding sex, ethno-cultural differences, or technical capacities. Whichever way you look at it, diversity is here to stay and it will increase. Ultimately, it will depend on what your board is trying to achieve for its stakeholders. Taking a strategic look at this area of your board’s competitiveness is just one more tool in the arsenal of performance.
Bradshaw, P., Murray, V., & Wolpin, J. (1996). Women on boards of nonprofits: What difference do they make? Nonprofit Management & Leadership, 6(3), 241-254.
Carter, D. A., Simkins, B. J., & Simpson, G. W. (2003). Corporate governance, board diversity, and firm value. The Financial Review, 38, 33-53.
Ginger, S. (2003). Female brains vs. male brains. International Journal of Psychotherapy, 8(2), 139-145.
Goleman, D., Boyatzis, R., & McKee, A. (2002). Primal leadership: Realizing the power of emotional intelligence [Kindle Edition]. Boston: Harvard Business School Press. Retrieved from www.amazon.ca
Hyland, M. M., & Marcllino, P. A. (2002). Examining gender on corporate boards: A regional study. Corporate Governance, 24-31.
Statistics Canada. (2013). Immigration and ethnoculture diversity in Canada (Catalogue no. 99-010-X2011001). Retrieved from http://www12.statcan.gc.ca/nhs-enm/2011/as-sa/99-010-x/99-010-x2011001-eng.cfm
Brian Mendoza Dominguez