Journals A-Z
All Subjects
Free Journals
sciepub.com
Journal of Business and Management Sciences
ISSN (Print): 2333-4495 ISSN (Online): 2333-4533 Website: https://www.sciepub.com/journal/jbms Editor-in-chief: Heap-Yih Chong
Open Access
Journal Browser
Go
Issue 3, Volume 12
Article Metrics
  • 3447
    Views
  • 4171
    Saves
  • 0
    Citations
  • 0
    Likes
Export Article
Journal of Business and Management Sciences. 2024, 12(3), 111-118
DOI: 10.12691/jbms-12-3-1
Open AccessArticle

Diversity and Inclusion in Institutional Governance: The Role of Demographic Heterogeneity of Boards and Executive Committees in Organizational Effectiveness

Dennis John Rabson Matekenya PhD1, and Judith Musvosvi PhD Candidate2

1Adventist University of Africa (AUA), Nairobi – Kenya

2ADRA Country Director, Harare - Zimbabwe

Pub. Date: April 29, 2024
View Full Text Full Text PDF (331 KB) Full Text ePUB(175 KB)

Cite this paper:
Dennis John Rabson Matekenya PhD and Judith Musvosvi PhD Candidate. Diversity and Inclusion in Institutional Governance: The Role of Demographic Heterogeneity of Boards and Executive Committees in Organizational Effectiveness. Journal of Business and Management Sciences. 2024; 12(3):111-118. doi: 10.12691/jbms-12-3-1

Abstract

The issues of governance diversity have taken center stage with many organizations seeking to be compliant to regulatory requirements and reaching the diversity thresholds set up by different frameworks. The composition of any institutional board should be taken seriously as the board has the mandate to oversee the management decisions in taking the organization forward. Most diversity studies look at gender diversity, age diversity, ethnic diversity and educational diversity. However, it appears the conclusions stop at determining their role in creating organizational effectiveness. This study set out to achieve two things as guided by the research questions. First was to determine the nature, strength, and statistical significance of the relationship between independent variables (gender diversity, age diversity, ethnic diversity and educational diversity) and the dependent variable (Board Effectiveness). Second was to identify principal determinant among the independent variables to the board effectiveness. This study found that all listed independent variables have a linear and positive correlation which is statistically significant. Results showed relationship between independent variables and dependent variable board effectiveness to be positive and statistically significant (education diversity r = .419; p=<.001; age diversity r=.183, p=<.05; gender diversity r=.172, p=<.05; ethnic diversity r=.345, p=<.001). However, in identifying the principal determinant of board effectiveness, it was found that education diversity on the board had the highest coefficient which was also statistically significant (standardized beta .318 and p-values <.05) while the ethnic diversity was .244, and p-value <.05 with age diversity at .183 and p-value <.05. It has also been found that gender diversity contributes weakly to the variability in board effectiveness, which is not statistically significant, standardized beta .061, p-value >.05. Therefore, it can be said that the best way to increase gender participation at the governance levels is through development of experience, expertise and higher education. In this study n=160; Cronbach’s Alpha=.687; KMO=.698 and Bartlett’s Test of Sphericity =<.001.

Keywords:
age diversity gender diversity ethnic diversity education diversity board diversity board inclusion

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]  Goodstein, J., Gautam, K., & Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic Management Journal, 15(3), 241–250.
 
[2]  Beekun, R. I., Stedham, Y., & Young, G. J. (1998). Board characteristics, managerial controls and corporate strategy: A Study of U.S. Hospitals. Journal of Management, 24(1), 3-19.
 
[3]  Siciliano, J. I. (1996). The relationship of board member diversity to organizational performance. Journal of Business Ethics, 15(12), 1313-1320.
 
[4]  Hillman, A., Withers, C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404-1427.
 
[5]  Kosnik, R. D. (1990). Effects of board demography and directors’ incentives on corporate greenmail decisions. The Academy of Management Journal, 33(1), 129–150.
 
[6]  Johnson, S. G., Schnatterly, K., & Hill, A. D. (2013). Board composition beyond independence: Social capital, human capital, and demographics. Journal of Management, 39(1), 232–262.
 
[7]  Carpenter, M. A., & Westphal, J. D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management Journal, 44(4), 639–660.
 
[8]  Stuart, T. E., & Yim, S. (2010). Board interlocks and the propensity to be targeted in private equity transactions. Journal of Financial Economics, 97(1), 174–189.
 
[9]  Connelly, B., Johnson, J., Tihanyi, L., & Ellstrand, A. (2011). More than adopters: Competing influences in the interlocking directorate. Organization Science, 22, 688–703.
 
[10]  Haunschild, P. R. (1994). How much is that company worth?: Interorganizational relationships, uncertainty, and acquisition premiums. Administrative Science Quarterly, 39(3), 391–411.
 
[11]  Ruigrok, W., Peck, S. I., & Keller, H. (2006). Board characteristics and involvement in strategic decision making: Evidence from Swiss companies. Journal of Management Studies, 43(5), 1201–1226.
 
[12]  Bizjak, J., Lemmon, M., & Whitby, R. (2009). Option backdating and board interlocks. The Review of Financial Studies, 22(11), 4821–4847.
 
[13]  Rhee, M., & Lee, J.-H. (2008). The signals outside directors send to foreign investors: Evidence from Korea. Corporate governance: An International review, 16(1), 41–51.
 
[14]  Jones, C. D., Makri, M., & Gomez–Mejia, L. R. (2008). Affiliate directors and perceived risk bearing in publicly-traded, family–controlled firms: The case of diversification. Entrepreneurship theory and practice, 32(6), 1007–1026.
 
[15]  Frankforter, S. A., Berman, S. L., & Jones, T. M. (2000). Boards of directors and shark repellents: Assessing the value of an agency theory perspective. Journal of Management Studies, 37(3), 321–348.
 
[16]  Stevenson, W., & Radin, R. (2009). Social capital and social influence on the board of directors. Journal of Management Studies, 46(1), 16-44.
 
[17]  Wincent, J., Anokhin, S., & Örtqvist, D. (2010). Does network board capital matter? A study of innovative performance in strategic SME networks. Journal of Business Research, 63(3), 265-275.
 
[18]  Certo, S. T. (2003). Influencing initial public offering investors with prestige: signalling with board structures. The Academy of Management Review, 28(3), 432-446.
 
[19]  Kang, E. (2008). Director interlocks and spill over effects of reputational penalties from financial reporting fraud. Academy of Management Journal, 51(3), 537-555.
 
[20]  Fich, E. M., & Shivdasani, A. (2007). Financial fraud, director reputation, and shareholder wealth. Journal of Financial Economics, 86(2), 306–336.
 
[21]  Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749-778.
 
[22]  Joshi, P. (2011). Security issues in routing protocols in MANETs at the network layer. Procedia computer science, 3, 954-960.
 
[23]  Deloitte. (2019). King IV Independent Directors: How to assess independence. Retrieved from Deloitte South Africa website: https:// www2.deloitte.com/za/en/pages/africa-centre-for-corporate-governance/articles/kingiv_independent_directors.html.
 
[24]  Australian Institute of Company Directors. (2013). Role of the board governance relations. Australian Institute of Company Directors. https:// aicd.companydirectors.com.au/ -/media/cd2/resources/director-resources/director-tools/pdf/05446-3-11-mem-director-gr-role-of-board_a4-v3.ashx.
 
[25]  Neukirchen, Daniel and Posch, Peter N. and Betzer, André, Board Age Diversity and Corporate Misconduct (April 27, 2022).
 
[26]  Emrah Arioglu (2020) Board age and value diversity: Evidence from a collectivistic and paternalistic culture http:// www.elsevier.com/ journals/borsa-istanbul-review/2214-8450 Cukurova University, IIBF Isletme Bolumu, Balcali, Adana, 01330, Turkey.
 
[27]  Janahi, Mohamed, Millo, Yuval and Voulgaris, Georgios (2023) Age diversity and the monitoring role of corporate boards : evidence from banks. Human Relations, 76 (10). pp. 1599-1633.
 
[28]  Gardiner, E. (2022). What’s age got to do with it? The effect of board member age diversity: a systematic review. Manag Rev Q.
 
[29]  Wiersema, M. F., & Bantel, K. A. (1992). Top management team demography and corporate strategic change. The Academy of Management Journal, 35(1), 91–121.
 
[30]  Ahn, S., & Walker, M. D. (2007). Corporate governance and the spinoff decision. Journal of Corporate Finance, 13(1), 76–93.
 
[31]  Golden, B. R., & Zajac, E. J. (2001). When will boards influence strategy? Inclination x power = strategic change. Strategic Management Journal, 22(12), 1087–1111.
 
[32]  Platt, H., & Platt, M. (2012). Corporate board attributes and bankruptcy. Journal of Business Research, 65(8), 1139–1143.
 
[33]  Mustafa AS, Che-Ahmad A, Chandren S (2018) Board diversity, audit committee characteristics and audit quality: the moderating role of control-ownership wedge. Bus Econ Horizons 14:587–614.
 
[34]  Zhang C, Luo L (2021) Board diversity and risk-taking of family firms: evidence from China. Int Entrep Manag J 17(4):1569-1590.
 
[35]  Baker-Kent, H., Pandey, N., Kumar, S., & Haldar, A. (2019). A bibliometric analysis of board diversity: Current status, development, and future research directions. Journal of Business Research, 108, 232-246.
 
[36]  Harjoto, M. A., & Rossi, F. (2019). Religiosity, female directors, and corporate social responsibility for Italian listed companies. Journal of Business Research, 95, 338–346.
 
[37]  Terjesen, S., Sealy, R., & Singh, V. (2009). Women directors on corporate boards: A Review and Research Agenda. Corporate Governance: An International Review, 17(3), 320–337.
 
[38]  Bøhren, Øy., & Strøm, R. (2010). Governance and Politics: Regulating independence and diversity in the board room. Journal of Business Finance & Accounting, 37(9), 1281–1308.
 
[39]  Kabongo, Jean & Okpara, John. (2019). Timing and speed of internationalization: Evidence from African banks. Journal of Business Research. 102. 12-20. 10.1016/j.jbusres.2019.05.003.
 
[40]  Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291–309.
 
[41]  Arfken, D. E., Bellar, S. L., & Helms, M. M. (2004). The ultimate glass ceiling revisited: The presence of women on corporate boards. Journal of Business Ethics, 50(2), 177–186.
 
[42]  Nielsen, S., & Huse, M. (2010). The contribution of women on boards of directors: Going beyond the surface. Corporate Governance: An International Review, 18(2), 136–148.
 
[43]  Post, C., Rahman, N., & Rubow, E. (2011). Green governance: Boards of directors’ composition and environmental corporate social responsibility. Business & Society, 50(1), 189–223.
 
[44]  Carter, D. A., D’Souza, F., Simkins, B. J., & Simpson, W. G. (2010). The Gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18(5), 396–414.
 
[45]  Hindasah, Lela & Harsono, Mugi. (2021). Gender Diversity on the Board of Director and Firm Performance: Agency Theory Perspective. Jurnal Manajemen Bisnis. 12. 10.18196/mb.v12i2.10804.
 
[46]  Khan, M. H., Fraz, A., Hassan, A., & Abedifar, P. (2020). Female board representation, risktaking and performance: Evidence from dual banking systems. Finance Research Letters, 37, 101541.
 
[47]  M. Bennouri, T. Chtioui, H. Nagati, M. Nekhili (2018). Female board directorship and firm performance: what really matters? J. Bank. Financ., 88 (3) (2018), pp. 267-291, 10.1016/j.jbankfin.2017.12.010.
 
[48]  K. Naveed, C.L. Voinea, Z. Ali, F. Rauf, C. Fratostiteanu (2021). Board gender diversity and corporate social performance in different industry groups: evidence from China. Sustainability, 13 (6) (2021), article 3142, 10.3390/su13063142.
 
[49]  Fernandez, W. D., & Thams, Y. (2018). Board diversity and stakeholder management: the moderating impact of boards’ learning environment. Learning Organization, 26(2), 160–175.
 
[50]  Guest, P. M. (2018). Does Board Ethnic Diversity Impact Board Monitoring Outcomes? British Journal of Management, 30(1), 53-74.
 
[51]  Guest, Paul. (2019). Does Board Ethnic Diversity Impact Board Monitoring Outcomes?. British Journal of Management. 30. 53-74. 10.1111/1467-8551.12299.
 
[52]  Krause, T., & Van Thiel, S. (2019). Perceived managerial autonomy in municipally owned corporations: Disentangling the impact of output control, process control, and policy-profession conflict. Public Management Review, 21(2), 187–211.
 
[53]  Staples, C. L. (2008). Cross-border acquisitions and board globalization in the world’s largest TNCS, 1995-2005. The Sociological Quarterly, 49(1), 31–51.
 
[54]  Farrell, K., & Hersch, P. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1-2), 85-106.
 
[55]  Sundaram, A. K., & Inkpen, A. C. (2004). The corporate objective revisited. Organization science, 15(3), 350–363.
 
[56]  Magnanelli, B. S., Paolucci, G., & Pirolo, L. (2021). Diversity in boardrooms and firm performance: The role of tenure and educational level of board members. Corporate Board: Role, Duties and Composition, 17(3), 31–41.
 
[57]  Shatnawi, Ahmad & Al-Gasawneh, Jassim & Mansur, Hasan & Alresheedi, Adel. (2022). The effect of board nationality and educational diversity on CSR performance: Empirical evidence from Australian companies. Uncertain Supply Chain Management. 10.5267/ j.uscm.2022.6.009.
 
[58]  Kim, H., & Lim, C. (2010). Diversity, outside directors and firm valuation: Korean evidence. Journal of Business Research, 63(3), 284–291.
 
[59]  Dalziel, T., Gentry, R. J., & Bowerman, M. (2011). An integrated agency–resource dependence view of the influence of directors’ human and relational capital on firms’ R&D spending. Journal of Management Studies, 48(6), 1217–1242.
 
[60]  Beji, R., Yousfi, O., Loukil, N., & Omri, A. (2021). Board diversity and corporate social responsibility: Empirical evidence from France. Journal of Business Ethics, 173(1), 133-155.
 
[61]  Kassinis, G., & Vafeas, N. (2002). Corporate boards and outside stakeholders as determinants of environmental litigation. Strategic Management Journal, 23(5), 399–415.
 
[62]  Rosenstein, J., Bruno, A. V., Bygrave, W. D., & Taylor, N. T. (1993). The CEO, venture capitalists, and the board. Journal of Business Venturing, 8(2), 99–113.
 
[63]  Wang, J., & Dewhirst, H. D. (1992). Boards of directors and stakeholder orientation. Journal of Business Ethics, 11(2), 115–123.
 
[64]  Filatotchev, I., Wright, M., & Arberk, M. (2006). Venture capitalists, syndication and governance in initial public offerings. Small Business Economics, 26(4), 337–350.
 
[65]  Chen, K. Y., & Zhou, J. (2007). Audit committee, board characteristics, and auditor switch decisions by Andersen’s clients. Contemporary Accounting Research, 24(4), 1085–1117.
 
[66]  Dahl, D. (1994). Successor origin, initiating force, and managerial tenure in banking. Journal of Business Research, 29(1), 47–55.
 
[67]  de Villiers, C., Naiker, V., & van Staden, C. J. (2011). The effect of board characteristics on firm environmental performance. Journal of Management, 37(6), 1636–1663.
 
[68]  Wellalage, Hewa., Nirosha & Locke, Stuart. (2013). Corporate governance, board diversity and firm financial performance: New evidence from Sri Lanka. Int. J. of Business Governance and Ethics. 8. 116 - 136. 10.1504/IJBGE.2013.054416.
 
[69]  Kabara, A. S., Khatib, S. F. A., Bazhair, A. H., & Sulimany, H. G. H. (2022). The Effect of the Board’s Educational and Gender Diversity on the Firms’ Performance: Evidence from Non-Financial Firms in Developing Country. Sustainability, 14(17), 11058. MDPI AG. Retrieved from.
 
[70]  Sharma, Sohil. (2019). Descriptive Research Designs. https:// www.researchgate.net/publication/333220662_Descriptive_Research_Designs/citation/download.
 
[71]  Manjunatha, N., (2019). Descriptive Research. International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.6, Issue 6, page no.863-867, June 2019, Available :http:// www.jetir.org/papers/JETIR1908597.pdf.
 
[72]  Neukirchen, Daniel and Posch, Peter N. and Betzer, André, Board Age Diversity and Corporate Misconduct (April 27, 2022).
 
[73]  Khamis, Ree & Eldabi, Tillal & Sarea, Adel. (2017). Board Gender Diversity: A Review of the Literature. 10.47556/ B.OUTLOOK2017.15.14.
 
[74]  Moreno-Gómez, J., Lafuente, E., Vaillant, Y. (2018). Gender diversity in the board, women’s leadership and business performance. Gender in Management: An International Journal, in press.
 
[75]  Deloitte and Alliance for Board Diversity (2020) https:// www2.deloitte.com/us/en/pages/center-for-board-effectiveness/ articles/missing-pieces-report-board-diversity.html.
 
[76]  Zattoni, A., Leventis, S., Van Ees, H., & De Masi, S. (2023). Board diversity's antecedents and consequences: A review and research agenda. Leadership Quarterly, 34(1), Article 101659.
 
[77]  Gold, Nusirat & Aifuwa, Hope & Usman, Muhammed & Muhammed, Lawal & Subair, & Osazevbaru, Albert & Moroyin, Betsy. (2021). Board Members' Education Diversity and Sustainability Reporting. Annals of Spiru Haret University Economic Series. 21. 109-129. 10.26458/2115.
 
[78]  Westphal, J. D., & Fredrickson, J. W. (2001). Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy. Strategic Management Journal, 22(12), 1113–1137.
 
[79]  Oxelheim, L. and Randoy, T. (2003) The Impact of Foreign Board Membership on Firm Value. Journal of Banking & Finance, 27, 2369-2392.
 
[80]  Bond, M and Bedenlier, S. 2019. Facilitating Student Engagement Through Educational Technology: Towards a Conceptual Framework. Journal of Interactive Media in Education, 2019(1): 11, pp. 1–14.
 
[81]  Kor, Yasemin & Sundaramurthy, Chamu. (2008). Experience-Based Human Capital and Social Capital of Outside Directors. Journal of Management. 35. 10.2139/ssrn.1090251.
 
Manuscript template