Impacts of Board Diversity on the Board Performance - Essay Example

Board of Directors-Board Diversity Affiliation Introduction There are different types of board diversity and the impacts this diversity has on the performance of a board. The different types of board diversity include human race e.g. white, brown or black who have different cultures to offer, Gender based; women representation on the board, Religion; Muslim, Catholic, Presbyterian etc, Sexual orientation; gay, lesbian and transgender communities, Age and Different Occupations that offer new skills, experiences and networks.

These types of diversities have numerous impacts on the board members and the organization’s finances, corporate reputation, social responsibility and social performance (Ronald, 2006). Impacts of board diversity on the board performance Cultural Backgrounds Different cultural backgrounds deal with aspects such as race, religion, sexual orientation and occupation. Communities tend to respond better to cultures that affect them directly. They relate better to their own, and they feel that people who understand them best will take care of their needs.

When the board has different cultures involved in decision-making, it will make the community content especially those of minority groups (Carter, Simkins & Simpson, 2003). A diverse board will also make sure that the board members engage in broader and richer conversations when there is involvement of different cultures. Board members from the same social circle will not chase their own tails. Diversity will bring new or different skills, experiences and networks input coming from a member who comes from a different social circle.

This is very beneficial to a company since it helps the directors be open-minded to new ideas and respectful towards other cultures and backgrounds. Women representation on the board Modern women are gaining the right expertise and are securing positions on the board of directors on major companies. Women have the same education level or higher and have the same experience as the men who qualify as board members. There should be equal opportunities for both genders as a way to ensure diversity.

There is an impact on finances when shareholder associates begin to pressure corporate boards to increase the number of women representatives. There will be a negative influence on the perception of any corporate with no women board members by large stockholders (Brammer, Millington & Pavelin, 2009). Lack of diversity when it comes to gender, can affect the reputation of a corporate (Craig, 2013). Female directors have a great public or media influence on the image of a corporation. There has been research carried out to find out if the presence of women raises the company’s admiration from the public.

Corporate social performance is higher in companies with more women directors, as opposed to ones with a majority of male directors (Brammer, Millington & Pavelin, 2009). As a potential solution to improving corporate image, countries like France, Spain and Norway have introduced mandatory quotas for female representation on the board. Women corporate directors heighten the stakeholders’ sensitivity e.g. environmental impacts (Burke, Ronald & Mattis, 2000). Age The age group of the board members can affect the decisions of the directors.

The young and old age groups should be part of any BOD. People with different ages will have varied ideas and suggestions. This will ensure that a company addresses the needs of the youth and that of the older generation (Crowther, 2008). Conclusion Board diversity proves to the public that a company considers social values. Corporate social responsibility (CSR) increases when women directors are part of a company’s BOD. CSR makes a company have positive public reputation. It represents a commitment to the social concerns creating a favorable image with a broad range of the stakeholders.

Public scrutiny of the corporate with or without women representatives shapes the corporate reputation. Different professional work fields amongst the board members create a platform for new skills, experiences and networks, which are very useful to the corporate. References Brammer, S., Millington, A. & Pavelin, S. (2009) Corporate Reputation and Women on the Board. British Journal of Management, 20(1): 17-29. Burke, J., Ronald & Mattis, M.C (2000) Women on Corporate Boards of Directors: International Challenges.

Retrieved from http://www.womencorporatedirectors.com/ Carter, D. A., Simkins, B. J. & Simpson, W. G. (2003) Corporate Governance, Board Diversity, and Firm Value. Financial Review, 38, 33-53. Craig, Carroll E. (2013). Handbook of Communication and Corporate Reputation. Wiley-Blackwell Coffey, B.S., & Wang, J. (1998) Board Diversity and Managerial Control as Predictors of Corporate Social Performance. Journal of Business Ethics, 17(14), 1595-1603. Crane, Andrew( 2008) Oxford Handbook on Corporate Social Responsibility.

Retrieved from http://books.google.co.ke/books?id=rb5bWuPVd_EC&pg=PA583&lpg=PA583&dq=Oxford+Handbook+on+Corporate+Social+Responsibility+ Crowther, David (2008). Culture and Corporate Gorvernance. Retrieved from http://www.zums.ac.ir/files/research/site/ebooks/management-organisation/corporate-governance-and-international-business.pdf Erhardt, N.L., Werbel, J.D. & Shrader, C.B. (2003) Board of Director Diversity and Firm Financial Performance. Corporate Governance: An International Review, 11(2), 102-111.

Fairfax, L. M. (2005) The Bottom Line on Board Diversity: A Cost-Benefit Analysis of the Business Rationales for Diversity on Corporate Boards. Wisconsin Law Review, 795, 839-840. Kang, H., Cheng, M. & S.J. Gray (2007) Corporate Governance and. Board Composition: Diversity and Independence of Australian. Boards. Corporate Governance: An International Review, 15 (2): 194-207. Mallin, A. Christine (2013) Corporate Governance. 4th edition. Ashford Colour Press. Ronald, Aslop. ( 2006) Immutable Laws of Corporate Reputation 18.

Retrieved from http://books.google.co.ke/books?id=MfRK5utELS8C&pg=PA193&source=gbs_toc_r&cad=3#v=onepage&q&f=false Wood, D. (2005). Corporate Social Performance Revisited. The Academy of Management Review, 16(4).