Gender Diversity

Gender Diversity (Women) on the Board of Directors

Many people still hold stereotypes within the business sector, believing that focusing on task achievement and performance outcomes is generally believed to be a male leadership strength, while focusing on interpersonal relations and employment satisfaction are the strengths of female leaders. In the business sector, women like men have their own points of view, experiences, and working styles that differs to some extent from those of their male colleagues.

Thus the 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 I think the existence of gender diversity impacts the effectiveness of a 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-orientated, 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 created by having women in the board of directors.

  • THE EFFECTIVENESS OF THE BOARD OF DIRECTORS

Females behave differently than males with regards to attendance conduct. The possibility of having attendance problems is lessened with women than it is with men. Furthermore, the existence of a greater percentage of women on the board leads to better attendance conduct of the male directors. Also boards with more gender diversity have more board meetings and demonstrate more effective ways to manage the performance-related pay discrepancies.

  • BOARD INDEPENDENCE

Historically, people believed that females had limited experience in executive roles, so the presence of more women in the board room 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.

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