Board Diversity Case Study

Board Diversity and Social Performance

Introduction

Board diversity

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors. It is often simply referred to as "the board". A board's activities are determined by the powers, duties, and responsibilities given to it by an authority itself. These matters are mentioned in the organization's bylaws. It includes the number of members of the board, how they been chose, and when are the meeting date. However, these bylaws rarely describe a board's powers when a corporation in recovery stage or restructuring, where

Boards of directors may differ in many important characteristics such as educational and financial background, industry experience, social aspect, status, gender and race. All other board characteristics are usually not important unless they are somehow related to (formal or real) independence.

BENEFITS AND COSTS OF DIVERSITY

From a practical perspective, if firms want to choose the composition of their boards in order to maximize firm value, they should have at least a qualitative idea about the trade-offs of demographic diversity. This section discusses various potential benefits and costs of board diversity featured in the academic literature.

Potential Benefits of Board Diversity

1) Creativity and different

Demographic dissimilarity may cause problem in communication among subgroups, create conflict, and reduce attraction among group members and reduce group cooperation. In corporate boards there are possibility of communication breakdowns between top executives and minority outside directors. Outside directors rely on executives to gain access to firm-specific information (Adams and Ferreira, 2007). When the executives refuse to share information with minority outside directors this could affect the board