Corporate Governance Diversity Issues Review Report

This report critically examines corporate governance diversity, focusing on age and gender dynamics within boardrooms. It begins by highlighting the importance of diversity for effective decision-making, risk management, and overall corporate success. The report then delves into the benefits of age diversity, emphasizing the value of younger directors' technological knowledge and the experience of older directors. It also addresses the challenges of integrating young directors, including time constraints, and provides recommendations for improving age diversity. The report contrasts this with a discussion on gender diversity, noting that while gender diversity is often associated with improved decision-making, research findings on the impact of female directors on financial performance are mixed. The report also discusses the potential for minorities to self-censor, impacting the full realization of gender diversity benefits, and provides recommendations for improving gender diversity. The report concludes by emphasizing the need for organizations to recruit diverse directors based on a range of factors, including age and gender, to foster innovation and creativity within the boardroom.

Running head: CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
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Abstract
Experienced directors have highlighted that the CEO must be placed high enough in relation to
the others so that the director roles can be taken up actively. It has been assumed by the tenured
directors that the young directors will not have enough time. Younger generation directors have
the knowledge of the business technology, while at the same time the more matured and
experience directors have the advantage of the traditional skills. In several cases, majority of the
directors are experienced and mature and this experience will be required to fill the vacant spaces
in the boardroom and also in the later part of their job as they will have more time to spare.

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Contents
Introduction......................................................................................................................................3
Diversity entity which is more successful.......................................................................................3
Diversity entity which is less successful.........................................................................................6
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

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Introduction
In the world of the corporate governance, the board of directors have received a
considerable amount of attention. The companies that are headed by the diverse groups are found
to be more successful in comparison to the business environments that are complex. Therefore, it
is important to mention that the succession plans and the appointment plans need to promote
people from different ethnic backgrounds, social, personal strengths, cognitive and gender. The
term diversity in the boardroom provides a balanced board and the true essence of the board
governance. The Boardroom diversity includes individual that belong from differing careers,
experiences, competencies, thinking and terms of skills (Hafsi and Turgut 2013). A major benefit
of having a diverse boardroom is that diversity leads to effective decision making. It is important
to note that diverse boardrooms have different experiences, background and skills. The presence
of diversity will provide a thoughtful and considerate decision making allows the boardroom to
have a comprehensive oversight. When a boardroom is diverse and well structured, then it
possesses the capabilities of foreseeing the risks and the challenges. Therefore, diversity in the
board room leads to effective risk management and this enable the boardroom to effectively
tackle the difficult situations (Hillman 2015). In this study, a critical review of the diversity in
boardroom will be done, along with the findings and recommendations.
Diversity entity which is more successful
According to the Annual Corporate Directors Survey, it has been found that the diversity
in age plays a vital part in having diversity of thought it has also been highlighted by 90 percent
of the directors. In fact, the survey showed that age diversity is highly vital in comparison to the
other elements like the race and gender. The average age of the directors is moving up and on an
average the directors are above 63 years of age. It has been seen that the directors that are

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experienced are highly valuable and the benefit is evident in several business cycles. These
experienced leaders can share their perspective and at the same time provide the expertise so that
the challenges can be addressed effectively. Moreover, the environment is changing constantly
and currently the directors are younger and they are well positioned that can add value to the
companies (Loop and Bromilow 2018).
Criteria- the criteria based upon which the diversity of age is reviewed are the challenges
that are brought about by: the digital technologies and digital revolutions like the artificial
intelligence and the robotics that are reshaping the workforce and the corporate opportunities; the
millennials are about to become one of the most powerful group in United States and they will
have different kinds of priorities and spending habits. When these consumers will mature in the
labour market, then their expectation will lead to changes in the workplace; the lines that
separate the industries are blurring day by day and the traditional companies will be able to keep
up to the pressure; a corporate scandal can (either alleged or real) can erupt in the social in a
course of few hours (Ali, Ng and Kulik 2014).
Thus it is important to mention that the young directors that have been able to address
such changes or criteria in the business environment. According to the S&P 500 there is only 348
young directors among the 5500 board seats. Majority of young directors have an average tenure
of 2.8 years, and the majority of the independent directors are having a tenure of 8.2 years. Thus,
more than 50 percent of the young independent directors are present in the board for just 2 years
or less (Hafsi and Turgut 2013). The things that are highly notable among the young directors are
that they are busy people, a very small number is retired. While it is important to highlight that
90 percent of the young directors have active job roles that are according to the job role of the
company. The experienced directors have highlighted that the CEO must be placed high enough

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in relation to the others so that the director roles can be taken up actively (Galia and Zenou
2013). When some of the boards look for the young directors, they are consciously looking for
someone that is either not working for full time or is retired. The long tenured directors have
revealed that the board searches for the director that is purposefully looks for recent retiree. It
has been assumed by the tenured directors that the young directors will not have enough time.
This is because the boards are made up of the retired executives and it will be difficult for a
young director to remain active within the board. While the young board members are chosen
because they not only provide a young perspective, they also provide specific knowledge and
skills (Ferrero-Ferrero, Fernández-Izquierdo and Muñoz-Torres 2015).
The success of the age related diversity- more representative: just like the younger
generation directors have the knowledge of the business technology, while at the same time the
more matured and experience directors have the advantage of the traditional skills. The diversity
provides the business with the ability to communicate and make deals with the clients across all
spectrum of age. One client might prefer a fast paced email reply, while the another client might
require a formal business letter. Mentoring- the younger members in the board have less amount
of experience and also have less amount of exposure to risks and governance (Buse, Bernstein
and Bilimoria 2016).
Recommendation on improving the age diversity- age diversity leads to the better
innovation within the culture of the company. There are certain traits and the qualities that needs
to cross the age brackets and generations. Thus, it is vital to identify the qualities that are
required within the organization and also recruit them specifically without having any boundaries
on age. In several cases, majority of the directors are experienced and mature and this experience
will be required to fill the vacant spaces in the boardroom and also in the later part of their job as

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they will have more time to spare (Ben-Amar, Chang and McIlkenny 2017). The experiences that
will be brought by the company will be important for the organization. The age diversity in
boards will positively help in benefiting the organizations from a set of different perspectives.
The development of the board will be fostered along with innovation and creativity. Therefore, it
does not carry a meaning if the board is simply adding young directors for the sake of making it
diverse. Moreover, age diversity does not mean that they will comprised of entirely with the
young directors. Diversity will also mean considering the directors that belong from a cross age
groups (Rhode and Packel 2014).
Diversity entity which is less successful
Several commentators have suggested that diversity ion the boardroom improves the
performance of the company and that the different types of the viewpoints that it experiences.
Research has been conducted and they have highlighted that financial and consulting firms is
does not perform better if the boardroom has women members. Moreover, the firms also do not
perform worse. It has been found in a study that the firms that have more female firms tend to
have more financial returns and the return are based on the return on equity, return on assets that
with the companies that have less female directors (Pletzer et al. 2015). The relationship that was
obtained through the statistical data was not significant and it was a chance effect. Commentators
have often highlighted that the boardrooms that have more women in comparison to the men
have more decision making skills due to different types of values, knowledge and the
experiences. Thus, it provides a change in perspective and information. The cognitive variety of
the board increases and the more the options the more the consideration of the different options
(Post and Byron 2015).

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Even if the women are named into the corporate boards, there is a difference in the
number of the men in the boards. It is important to note that the female directors do not speak up
during the conversations in the boards and moreover these female board members lack the
capability to influence the decision of the board. It is seen that when the minorities group often
self-censor and themselves back from expressing them belies and opinions. Moreover, even if
the minorities speak up then also the individuals belonging from majority will be discount the
views of the minorities. If such a dynamism occurs within the board then the board will be
unable to take the full advantage of the gender diversity. Research conducted have highlighted
that the board members that have gender diverse board members will make fewer acquisitions
than the board consisting of all male members (Ararat, Aksu and Tansel Cetin 2015). Thus, it
can be said that the companies are likely to have benefit from acquisitions in certain cases and in
certain cases companies are likely to suffer at certain situations. Hence, inclusion of female into
the boardroom will reduce risk and it might lead to a neutral effect. Moreover, it is important to
note that the addition of the addition of the corporate boards enhance and improve the decision
making and cognitive variety of the company and it gets positively reflected into the accounting
performance (return on assets, profits and sales) but not the market returns. While it is important
to mention that other things being equal, the analysts regard an all board to be more competent
rather than a gender diverse board (Chen, Crossland and Huang 2016).
Criteria- women are generally inclined than men in posing their experiences, credentials,
qualifications to speak for themselves. It is important to note that a strong background can be
beneficial but it is not enough to win the final vote. It has been seen that many women reach to
the shortlist but however lose the seat to a male candidate and they become more adept towards
seeking the advocacy while competing for a position. The women director of the leader must be

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groomed enough so that they can have the proper exposure. The exposure will provide the new
leader with the wider pool of leadership styles and it will be beyond their specific roles in
industries, companies and mentorship programs. The role of the chairman of an organization is to
see the bigger picture for the organization. Thus, gender parity is a priority and it will be setting
the stage for the entire company and it will be considered as a key position and recruitment will
be done through a gender blind process (Chen, Leung and Goergen 2017).
Recommendation on improving the gender related diversity- companies must consider
the female candidates based on the criteria ion which the male candidates are selected- After the
retirement of the high profile female CEOs, they are often being called to serve the corporate
boards of the companies. It is often seen that the men are promoted based on their potential while
women are promoted based on their accomplishments. Such kind of biasness must not be
followed when recruiting a female retired director (Eagly 2016); The companies need to be
persistent to alter the composition of board service- For the purpose of board service, women
need to develop their value proposition. It is important to note that there exists a major difference
between the directorship and positioning oneself for a job. At the level of an executive, getting a
job means getting a chance to be a leader (Chen, Crossland and Huang 2016). Whereas, being a
part of boardroom means to have experience and expertise in emerging markets, digital
marketing and cybersecurity or the other most sought after qualities. The board members focus
basically on the strategy of fiduciary responsibility, succession of CEO, and planning. Women
must be selective about their membership in board- it is an important aspect because the board
members must evaluate the history of the company and the present situation. It is important to
note that that it is easy get selected by it is more difficult to resign from boardroom is such a

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short notice. Thus, it is necessary that the women candidate must be selective (Jeong and
Harrison 2017).
Conclusion
From the above discussion it can be concluded that a major benefit of having a diverse
boardroom is that diversity leads to effective decision making. It is important to note that diverse
boardrooms have different experiences, background and skills. The environment is changing
constantly and currently the directors are younger and they are well positioned that can add value
to the companies. age diversity leads to the better innovation within the culture of the company.
There are certain traits and the qualities that needs to cross the age brackets and generations.
Commentators have often highlighted that the boardrooms that have more women in comparison
to the men have more decision making skills due to different types of values, knowledge and the
experiences.

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