Board Diversity

Running Head: BOARD DIVERSITY
BOARD DIVERSITY
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1BOARD DIVERSITY
Introduction
This essay is mainly demonstrated on what academic literature say about board
diversity and how could this knowledge be used to inform the public debate on board
diversity. The board of directors is one of the methods of the internal governance to make
sure that the managers and stakeholders are united. Diversity is believed to affect the
company’s short and long-term business. Board diversity aims to cultivate and grow a broad
range of characteristics, which reflects demographics in reality (Shaukat, Qiu & Trojanowski,
2016). Corporate diversity aims at creating a better understanding of the market area and
increase in innovation and proper functioning. It also magnifies the constructiveness of
corporate leadership. It also leads to more healthy and effective global relationships and
decisions that are more resourceful. Therefore, it is significant to understand the different
types and concept of board diversity and the role in context of corporate governance.
Discussion
Diversity produces efficient number of problem solving solutions. Heterogeneity may
cause more disagreement in the process of decision-making but eventually it leads to a
broader view. A vital factor in excellent corporate governance policy is the relationship
between shareholders and the members of the board. Corporate governance is the relationship
between the company and parties including shareholders, customers, employees and others.
Some firms tend to see diversity as not a factor to promote growth as it can lead to conflicts
while others see it as positive criteria for the long-term success. However, diversity can
improve the behavior of the top management and improve the overall performance.
Diversity can be defined as “the distribution of personal attributes among
interdependent members of a work unit’’ (Jackson, Joshi & Erhardt, 2003). Nowadays,
companies fail to look at their own board performance where they try to expand their interior

2BOARD DIVERSITY
compliance programs. They need to be held responsible for their performance and committed
to compliance. A board must reflect the variety of its employees, shareholders and its senior
management. Board diversity lays a protection against group thinking at board level. The
diversity of board members ensures that decision-making approaches are improved.
Therefore, it is necessary to recognize the importance and role of board diversity. A board of
directors is the highest authority of an association and is responsible for the overall
functioning and governance of the organization. The functioning of the board in an
organization can be affected by demographics of the board members (Harjoto, Laksmana &
Lee, 2015). The board is in charge for making various important decisions like monitoring
and enhancing the firm’s performance (Ibrahim & Hanefah, 2016). A diverse board helps the
board members to discuss negative issues and deal with them in the corporate world. It also
gives the organization a competitive advantage and a good impression of a healthy board.
The above reasons state that diverse boards improve the organization’s brand identity and
reputation. Academic literature states about board diversity that companies tend to choose
different types of directors according to attributes, top management executives prefer to
choose directors on their level, firms tend to choose directors as a way to tackle with the
outside environment and those from minority class see their position as a barrier to work as a
director (Chapple & Humphrey, 2014). Therefore, there are different dimensions of diversity,
which need to be understood.
Earlier board diversity used to focus on traditional works such as educational and
functional background but due to pressure, the focus has moved towards relation-oriented
proportions. When it comes to team performance, diversity is considered most important
(Hunt, Layton & Prince, 2015). The minimal presence of individual differences is not
sufficient in an organization but the interaction among them will phase out the differences
and result in positive outcome. Corporate governance consists of a list of rules and