The types of board diversity and its impact on board performance - Essay Example

Types of board diversity and the impact of diversity on board performance Introduction Diversity is the difference between things or people, the variety of assortment that makes us unique. Every person has unique skills, characteristics, and challenges that contribute much in the board performance. Despite that, the body structure is the same; physical characteristics differ making people have a greater deal of diversity. Diversity has the composition of age, gender, race and ethnicity, education, physical appearance, political persuasion among others (Wilson, 2010:231). It is the examination of these differences in a safe, affirmative, and fostering environment. Types of board diversity Age diversity- workforce increasingly varied in age demographics, creating proficient environment loaded with experience and maturity as well as youthful enthusiasm. Companies that employ more workers in wide ranges of age have an advantage of creating a dynamic workforce with a diverse range of skills beneficial to the company. The following graph shows age variation on Board O of Directors of top 100 companies. Age(disclosed by 40 companies only) Frequency (no. Of director) Percentage (%) No. of directors whose age is disclosed 606 Directors under 41 12 1.98 Directors between 41 and 50 105 17.33 Directors between 51 and 60 266 43.89 Directors between 61 and 70 209 34.49 Directors over 71 14 2.31 Available from Http://193.146.160.29/gtb/sod/usu/$UBUG/repositorio/10280929_kang.pdf [Accessed on May 03 2013]. Gender diversity- it is an Umbrella term used by Australians to swap transgender in a more comprehensive fashion. It is the skill of sex or gender identity beyond biological and dual philosophy of male and female. It celebrates the diversity in gender identities rather than some categories of people. Gender composition in a work place has its own advantages and disadvantages in the work force. Most of top boards in Australian do not have women. The following graph shows the percentage of women in 48 boards, in ASX 200 files. Available from: http://www.companydirectors.com.au/Director-Resource-Centre/Governance-and-Director-Issues/Board-Diversity/~/media/Resources/Director%20Resource%20Centre/Governance%20and%20director%20issues/Board%20diversity/Board%20Diversity%20images/Graph%20images/Percentageofwomen_19April.ashx?w=360&h=275&as=1 [accessed on May 03 2013] Race diversity- a race is a population distinguished from other populations within a species by hereditarily transmitted physical characteristics. It has a unique and distinct ensemble of genes and remains identified by this genetic ensemble. Members of the same race share distinguished genetic characteristics because they share the same ancestry. This also depends on language distribution. The following graph show race or ethnic diversity from a county make up. Available from: Http://www.google.com/imgres?imgurl [accessed on May 06 2013] Culture diversity- this is about the ethnic groups, nationalities, lifestyles, and the educational level. Two people may appear similar on the outside but have different cultures, values, view points, and work styles. It is equally valuable for a business to acknowledge multiple cultures that exist within the work place. Mangers work in hand with the employees to ensure that their cultures remain respected. The following graph shows women cultural diversity on trusteeship in 1931. Available from: http://www.google.com/imgres?imgurl [accessed on May 06 2013] Religion diversity- people continue to express a high level of religion involvement that is highly significant and productive in both the work force and our daily lives. In the recent, religious discrimination, remain practiced highly in the workforce. This diversity contributes much in the performance of a company. Catholics and Christians have the highest percentage in Australia while others like Anglican, uniting church, Presbyterian and reformed among others follow. The following graph shows the proportion of religious diversity in boards of companies for different countries. Available from: Http://www.google.com/imgres?imgurl [accessed on May 06 2013] Experience diversity- people possess different experience in workforce. Despite that people in a certain department have the same level of education, their experience in that department differ. This difference has a lot of impact in the company. This graph shows the proportion of experience diversity in a group of the board of directors. Available from: http://www.google.com/imgres?imgurl [accessed on May 06 2013] Ethical perspective- this is a subject of knowing what is wrong or right in workforce. Different companies employ different techniques in handling ethics in a company to emphasize its growth. A company may decide to make the employees to participate in decision-making and regulations to run the company. From the involvement, companies use diversity and ethics programs to enact commitment to principles, use of exploration assumptions, and connect a dialogue that balance advocacy and inquiry. This graph represents ethical diversity on boards for United Kingdom business-book Company that has not achieved anything. Available from: http://www.google.com/imgres?imgurl [accessed on May 06 2013] Political persuasive-these are political creeds that support or influence ideas and functions in an organization and promoting these diverse cultures. Some political persuasions may aid a communication between populace of different backdrops and lifestyles, leading to better-acknowledge, understanding and peaceful coexistence. This graph below shows political persuasive diversity on boards over different types of diversities. Available from: Http://www.google.com/imgres?imgurl [Accessed on May 06 2013]. Analysis on gender in equality Gender in equality continues rule in management functions and the increase in the number of female as the university graduate remains suffice to close the gap. As shown in the graph above, women representation in the top management will remain adamant unless the current rules of the promotion system change. Some of the things that prevent women growth in are the social policies that may be less or more favorable to them. In this case, men build polices that best suits them and leave the feminism less counted in the ordeals (Engelstad, 2012:224). The double burden syndrome, which is the combination of work and the domestic responsibilities tend to weigh heavily on women. They therefore, remain at the centre of family life with all the attendant constraints like the maternity, child rearing among others. The force of the constraints may diverge from one country to another depending on the hold offered. Compatibility of the double burden is inherent in our model society and the demands associated with the senior management. The dominant model in the business equates leadership with unfailing availability and the total geographical mobility (Fagan, 2012:30). Women feel the dominant model to be the main barrier to career advancement and success because the double burden cannot be reconcile it. The predominance of the masculine model is a further barrier to women’s participation in cooperate governance bodies. It requires a greater effort of adaptation for women to be confident in making their way to the management. Some managements claim the women are less assertive in the top management, and in many cases, their contribution become minimized (Erhardt, Werbel, & Shrader, 2003:107). If women are thus less naturally inclined to recognize and appreciate their own performance, it is then more difficult for them to assert their talent and gain recognition in the company. They lose the opportunity for promotion. Some women opt for the business career when the face psychological obstacles while others have great a focus on their families. In a male dominated environment, women find it difficult to find positions that best suit their constraints. Another barrier is the difficult to identify success. Women tend to face difficulties in success, which appears to hamper their development in their professionalism. Absence of female role models compounds a heightened perception of in achieving success in today’s business environment. This makes them lack the power to maintain top roles in the boards (Catalyst, 2004). Some other women have lower professional ambitions than men do. Their perception much attributes to the barriers with many of them giving men chances to rein them. This act occurs with just women perception hence causing barriers. Marriage can also make a woman voluntarily stop from advancing her career to take the marriage ties and remain in home to guard the house. This mostly affects the board performance because of gender inequality (Chrisler, 2010:456). According to Australian Institute of Company Directors, gender diversity within senior teams has become increasingly topical issue with the proportion of women remaining low, the proportions continues to change daily. Government attempts much in the gender balance through intervening to pass Legislations based on equal gender balance. Other things that see the gender diversity through are the daily debates to increase (Oram & Wilson, 2010). Debate continues to be the best way to increase the contribution of women in a leadership position in the business. The figure of countries opting for obligatory quotas of women for the panel of directors is growing, through consensus in Australia is to go for charitable targets (Brammer, Millington & Pavelin, 2009:25). Deloitte, Centre for Corporate Governance, Australia and the Australian industry group argue against quotas, insisting on achieving a necessary change on membership and spreading to other countries in adopting the quotas (n.p). They argue on merit-based appointments on the development and nurturing the quotas. One of the people to break the ranks and take the quota is the Governor-General, Quentin Bryce in 2011. She purported that no one gives up power and privilege willingly. This made her receive and vigorous support from treasury shadow. Early in this year, veteran banker insisted on incremental change that is not working. What they need for a change is a paradigm shift. The concern is on Corporations Act to include a quota of at least 25% female directors. Another federal Sex Discrimination Commissioner known as Liz backed on the statement affirming that it is necessary to joggle a misaligned system, which is the most viable way forward (Australian Government, 2009). Many European countries long for quota application. This is based on the fact there is evident spontaneous growth of women taking part in boards. A number approximated to be above twenty five percent of the directors of big French companies is women. If all countries obtain quotas to sustain more rapid progress on in gender diversity, then there will be adamant reciprocation for the implementation of quotas in all jurisdictions. Quotas set up precedents that targets strive to achieve by facilitating voluntary means. Targets kindle communal initiatives to make easy the development of women to board positions that quota systems may learn from (Carter, 2003:38). Nevertheless, the enlisting of women in boards is quite evident in many companies. This is so as the companies endeavor to realize what they fought for, gender equity. The ultimate goal for the companies is to ensure that through campaign these targets are realized. The campaigns are being carried out by selected institutions and organizations. Companies know the diverse representation on their board of directors is a critical tactic both in managing corporate status and in achieving financial achievement in the face of altering demographics and quick globalization of a business (Coffey, 1998:1576). A small number of women take part in the accounting of organizational records. To show loyalty, females are thus considered largely for job positions in organizations and later recruited as part of the company’s board of directors. On top of ensuring that the image of women serving in boards is positively perceived, assortment of board is checked keenly to ensure that those with the required skills are first vetted to increase the company’s proficiency. The new trend to ensure mixed gender in is initiated by the fact that the community governance sector gives strong emphasis to having boards comprising a small number of independent directors. In response to the changing expectations, companies look beyond traditional employment sources in an attempt to get directors who bring a greater diversity of knowledge, backdrops, and work styles (Kang, 2007:200). Importance of diversity The business and investment community long for debate on the relationship between corporate governance practices and financial act. However, it remains accepted that the mutual objective of maximizing shareholder worth requires not only greater performance, but also awareness to a diversity of governance issues, including board diversity (Revenga, 2011:343). Enhanced financial performance: diverse dimension on terms of gender sensitivity usually enhance. Ethnic and gender diversity on corporate promote a superior stock performance. This means that a diversified company on gender sensitivity promotes better stock returns and a less risk of loss for shareholders (Shrader, 2003:103). Changing customer base- Firms with the interest to remain competitive internationally will expand from reflecting the varied experiences and views of changing customer base. Having taken these demographics, it becomes vital for the management team, which makes decisions towards strategic operation of the business, to consider this diversity. In conjunction, women and minorities contribute $1.5 trillion annually to the Australian economy, and research approximates that women account for up to 70 percent of all customer decisions in the Australia (Capek, 2007:104). Improved employee motivation- the increased management link makes the employees aware that company is committed to the growth of women at the top management levels. Verified researchers say that making a variety of role models in the board levels can motivate employees by giving a real picture of the effort of the organization to include minorities. Companies realize a variety of benefits from representing and overall commitment to diversity at all levels of the organization. Subjective evidence suggests that a confirmed commitment to diversity is likely to pick up the appeal and preservation of female and minority workers, employee’s productivity, and employee drive, as well as increase customer’s loyalty (Fairfax, 205:839). Increased attractiveness to investors Investors progressively more make use of diverse nonfinancial ability, which factors in board range, as procedure in coming up with the right decision regarding use of assets. Publicly, there is an evident use of the female gender in the directorate to prove a latent step. Other advantages include strengthening the relationship with partners to eventually realize a positive corporate status. The attention old and new media is giving to the board diversity issue has in the recent past called the increase necessity and assured effectiveness on making the right choice of board to ensure that both gender are well represented. This has also ensured that racial issues are also addressed. Remuneration to companies undertakes such actions, which include enhanced corporate reputation among the stakeholders, customers, employees, communities and others, reduced exposure to adverse exposure to adverse promotion stemming from high-profile public campaigns, and reduced costs connected with the inclusion of shareholder solutions related to board diversity in annual alternative statement (Coombes, 2008:272). Conclusion Despite immense aspirations and significant effort towards attaining supplementary women in leadership, advancement over the last ten years best shows a slow movement, according to the recent report from the Australian Bureau of Statistics. Men continue to greatly outnumber women across leadership positions in public and private sector (Bourez, 2005:19). Lack of sufficient talent, knowledge, skills, power is among the reasons for failing to attain power in the top management. Men also contribute much to this dilemma by giving more duties to the women hence remaining in the family to honor the daily chores. Reference List Australian Government, Corporations and Markets Advisory Committee. 2009. Diversity on Boards of Directors Retrieved from: Http://www.camac.gov.au/camac/camac.nsf/byHeadline/PDFFinal+Reports+2009/$file/Board_Diversity_B5.pdf [accessed May 06 2013] Australian Institute of Company Directors, Board Diversity page: Retrieved from: Http://www.companydirectors.com.au/Director-Resource-Centre/Governance-and-Director-Issues/Board-Diversity [accessed on May 06 2013] Bourez, V. 2005. Women on boards: Moving beyond tokenism. Villennes Sur Seine, European Professional Women's Network. Brammer, S. Millington, A. & Pavelin, S. 2009 Corporate Reputation and Women on the Board. British Journal of Management, 20(1), 17-29. Capek, M. E. S., & Mead, M. 2007. Effective philanthropy: organizational success through deep diversity and gender equality. 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