Representation of Women on Board of Directors

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Gender diversity in boards is an essential ethical question for businesses. Different countries have introduced legislation and codes to promote the diversity of sexes. Many of the studies have touched on the relationship between the national culture and the structure of the board (Klettner 395). A recent Catalyst report shows that Fortune 500 companies with the highest women in boards of directors performed more financially than those with a low number of women directors (Catalyst). There has been increased advocacy for gender balance in companies. In the past decade, more women are being encouraged to serve in corporate board of directors. Gender groups are lobbying for quotas and state laws to promote the increase in number of women serving in boards of various organizations (Hausmann, Ricardo, Laura, Tyson and Saadia 22). Despite the efforts, the uptake of women has been painfully slow. Unlike men who are awarded senior positions based on their potential, women are being appointed to these boards due to their hard work. This study will focus on the representation of women in companies’ boards of directors, as a gender issue affecting the contemporary organizations.

Research Question

Why should the number of women on corporate boards be increased?

Hypothesis

  • Gender diversity in the board of directors improves female morale to work harder and gain skills and also boosts the corporations’ image.
  • With more women in senior positions of companies the board will be able to deal with risks in efficient ways

Facts and Relevant Research Findings

The number of women in corporate boards has been low due to limited number of qualified women candidates for managerial positions. In some countries, the low number is associated with cultural imbalance, for instance, early marriages in parts of Africa or lack of educational opportunities for women due to absolute poverty. In Arab countries, women are not allowed to own property and very few hold senior positions in organizations, precisely the finance and banking sector. Furthermore, some companies are reluctant to comply with rules and regulations governing gender balance in boards (Roseberry, Lynn and Johan 33).

Baker indicates that in Oregon state “women fill only 39 of the 340 board seats at Oregon's 46 public companies, and almost half of those companies have no women on their boards” (01). Although the situation is changing gradually, women are still facing difficulties joining boards due underlying male dominance. For instance, approximately two decades ago, former Oregon Governor Barbara Roberts reached out to few companies, Nike, few banks and insurance companies, with the sole intention of landing a seat at the corporate board of directors. Even with an outstanding resume, which included economic expansion programs in the state, a small background in business, and five-year experience teaching at Harvard, she did not get the job. However, in the entire country, male governors got “automatic board solicitation after finishing their terms.” This is a clear indication that women have been sidelined for a long time.

Women Representation in the Finance and Banking Sector

Women have failed to attain equal representation on company boards of directors in the finance and banking sector. This has become a point of concern for many scholars and practitioners. The Scandinavian countries have made a significant progress in enhancing women representation in boards as compared to other countries such as Morocco, which has 0% representation, Japan (0.9%), and Chile (2.4%) (Terjesen 234). However, Baker cites social equity and business performance as some of the factors that cause underrepresentation of women in company boards. According to the author, the pressure and difficulties associated with the job make it difficult to find women willing to serve. Further, the tough board scrutiny that candidates undergo before being appointed makes it difficult for women to join corporate boards of financial institutions. Women are also not coming up to serve the C-suite: the CEOs or the CFOs.

In order to counter this situation, feminist organizations have made greater strides in empowering women. Various countries responded by enacting laws designed to generate the most substantial change to the representation of women on boards (Terjesen 234). Norway was one of the countries to enact the 40% female quota system in 2003 in state-owned firms and publicly traded firms. Companies that fail adhere to this law are dissolved. And for that reason, the country is the country has the leading number of women in company boards. Spain and Italy instigated the same laws as well. These are just a few countries with concrete laws. Nevertheless, Asian, African, and the Americas have not fully embraced in their boards despite laws being in place. Klettner avers that the U.S to be precise favors the market-based approach as compared to the quota system. Although the rate of increase is slow, most leading companies are looking forward to achieve favorable gender diversity in their board of directors (Roseberry, Lynn and Johan).

Women bring many benefits to an organization, if given the opportunity to serve boards of directors and these include:

  1. They introduce several useful leadership qualities skills into the leadership sector such as less radical decision making.
  2. They promote effective corporate governance as they value the responsibilities of the higher positions.
  3. They promote the outlook of the organization in terms of gender diversity.
  4. They incorporate a transformational way of fulfilling the roles they play in the high hierarchy such as supportive treatment of colleagues.
  5. They increase the connection base and ties to other organization reducing the dependency rate.
  6. They have enhanced innovation and creativity in organizations

The research also found out that, a gender-diversified board minimizes the possibility of companies or organizations, because women are seen as outsiders with fresh minds who bring new ideas to the board. ‘Group think’ is a major problem in boards with homogenous groups’ since they have a unilateral approach to company issues (Hausmann, Ricardo, Laura, Tyson and Saadia 16). A heterogeneous group with women has a unique way of solving problems as they come up with new ideas and strategies. With more women in boards they serve as epitomes and mentors for women in other departments, they also are the foreseers of the application of the social justice and equity policies in companies. Women in senior managerial positions are likely to change the boardroom dynamics, to increase these number we need a change in policies and new recruiting process (Roseberry, Lynn and Johan).

Conclusion

In most countries, women now work and study like their male counterparts but their position in leadership is far from being actualized. The weight of the research is in agreement with the fact that the number of women in the boards in financial institutions and needs to be enhanced if companies have to enhance their value economically and socially. With the right policies and regulations set by governments we could see a high number of women in senior positions. Furthermore, Klettner opines that the rising number of women taking MBAs (more than 60%), change should come more organically in the corporate sphere since the focus will shift from gender to established competencies and experiences.

Recommendations

An increase in women in the senior positions should be encouraged in every organization. This can begin with a change of culture for most culturally affected countries.  

To reinforce this, a number of activities should be conducted. They include:

  • To review recruitment procedures of companies to avoid networking or informal processes that considers fewer women.
  • To establish legislations in companies that show how the company plans to increase women representation on the board.
  • To come up with ways of addressing gender equity at different levels of the organization thus increasing candidacy pool for board positions
  • To create awareness on why more women are needed in this senior managerial positions. This can be done through stakeholders, the government and the public.

Summary

Gender diversity advancement, if well considered, acts as an ethical factor, which promotes fairness. If a promotion is under consideration and women are equally qualified as their counterparts, they should be given priority on selection or promotion. Corporate initiative should be put in place as well as strict scrutiny of company operations to ensure compliance until change occurs.

Works Cited

Baker, Linda. "NO SEAT at the Table." Oregon Business Magazine, vol. 34, no. 11, Nov. 2011, p. 34. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bwh&AN=67224180&site=ehost-live.

Catalyst. Companies With More Women Board Directors Experience Higher Financial Performance, According to Latest Catalyst Bottom Line Report, 2016. http://www.catalyst.org/media/companies-more-women-board-directors-experience-higher-financial-performance-according-latest

Hausmann, Ricardo, Laura D. A. Tyson, and Saadia Zahidi. The Global Gender Gap Report 2009. Geneva, Switzerland: World Economic Forum, 2009.

Klettner, Alice1, alice.klettner@uts.edu.au, et al. "Strategic and Regulatory Approaches to Increasing Women in Leadership: Multilevel Targets and Mandatory Quotas as Levers for Cultural Change." Journal of Business Ethics, vol. 133, no. 3, Feb. 2016, pp. 395-419. EBSCOhost, doi:10.1007/s10551-014-2069-z.

Roseberry, Lynn, and Johan Roos. Bridging the Gender Gap: Seven Principles for Achieving Gender Balance. Oxford: Oxford University Press, 2014. Print.

Terjesen, Siri, terjesen@indiana.edu, et al. "Legislating a Woman's Seat on the Board: Institutional Factors Driving Gender Quotas for Boards of Directors." Journal of Business Ethics, vol. 128, no. 2, 08 May 2015, pp. 233-251. EBSCOhost, doi:10.1007/s10551-014-2083-1.

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