BOARD DIVERSITY IN COR­PO­RATE OR­GAN­I­SA­TIONS

THISDAY - - LETTERS - Uzoezi Umukoro is a le­gal prac­ti­tioner at Kenna Part­ners.

Re­defin­ing board diversity in terms of cul­ture, gen­der and other in­dices has been a sub­ject that has gar­nered a lot of at­ten­tion in re­cent times. This is ex­pected as the board of di­rec­tors is the sin­gu­lar most im­por­tant de­ci­sion-mak­ing or­gan of any cor­po­ra­tion, cru­cial to the per­for­mance and sur­vival of the com­pany.

There­fore, the com­po­si­tion of boards is the first step to­wards en­sur­ing that com­pa­nies (es­pe­cially pub­lic com­pa­nies) are thrust in the right di­rec­tion in terms of man­age­ment, share­holder and stake­holder value.

In the past, it was log­i­cal to have rep­utable, re­li­able and like-minded peo­ple serve on the board as such a con­sti­tuted board, would have the con­fi­dence of the share­hold­ers in their abil­i­ties and ca­pac­ity to man­age the com­pany in their best in­ter­est.

How­ever, glob­al­i­sa­tion and the com­plex­ity of busi­ness re­la­tion­ships have re­vealed the short­com­ings of this board-build­ing strat­egy and have brought to the fore, the need to broaden the com­po­si­tion of boards.

How­ever diversity for its own sake falls short of both the need and the op­por­tu­nity. An evo­lu­tion is un­der way, and boards are now be­gin­ning to re­alise that it is the breadth of per­spec­tive, not the mere in­clu­sion of var­i­ous di­verse traits, that ben­e­fits the or­gan­i­sa­tion. Diversity (in terms of age, eth­nic­ity, ex­pe­ri­ence and gen­der) must now be de­fined not only in terms of the iden­tity of the di­rec­tors but more im­por­tantly, in the di­verse per­spec­tives that each direc­tor can bring to add value and im­pact on com­pany per­for­mance.

The Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) in its Cor­po­rate Gover­nance Code stip­u­lated that the cri­te­ria for the se­lec­tion of di­rec­tors of pub­lic quoted com­pa­nies in Nige­ria should re­flect the ex­ist­ing board’s strengths and weak­nesses, re­quired skill and ex­pe­ri­ence, its cur­rent age range, and gen­der com­po­si­tion. This need for diversity has also been ar­tic­u­lated in the pro­vi­sion for in­de­pen­dent di­rec­tors. Sim­i­larly, the UK Cor­po­rate Gover­nance Code 2014 af­firms that: one of the ways in which con­struc­tive de­bate can be en­cour­aged is through hav­ing suf­fi­cient diversity on the board. This in­cludes, but is not lim­ited to gen­der and race. Diversity is as much about dif­fer­ences of ap­proach and ex­pe­ri­ence, and it is very im­por­tant in en­sur­ing ef­fec­tive en­gage­ment with key stake­hold­ers and in or­der to de­liver the busi­ness strat­egy.

It has been noted that for com­pa­nies with more com­plex op­er­a­tions, board het­ero­gene­ity has a pos­i­tive im­pact on per­for­mance.

This is in terms of age, ex­pe­ri­ence as well as for­eign rep­re­sen­ta­tion par­tic­u­larly for com­pa­nies with wide in­ter­na­tional net­work op­er­a­tions. Some re­search also shows that eth­nic con­sid­er­a­tion on boards of di­rec­tors would be ben­e­fi­cial to or­gan­i­sa­tion in terms of gain­ing crit­i­cal re­sources and where cor­po­rate gover­nance is con­cerned, ben­e­fits at strate­gic level are pos­i­tively re­lated to di­verse top man­age­ment.

An­other res­o­nant is­sue is that of gen­der diversity in board com­po­si­tion. Whilst this ad­vo­cacy has been some­what bi­ased in favour of women (usu­ally be­cause of the gen­eral propen­sity for the se­lec­tion of men on boards), both gen­ders should be rep­re­sented on boards to reach a bal­ance vis-à-vis the needs of the com­pany.

Guide­lines or a ‘com­ply or ex­plain’ ap­proach are im­por­tant to en­sure that the ap­point­ment of women (who are now play­ing catch-up to the men) on cor­po­rate boards does not amount to to­kenism or ‘win­dow dress­ing’ where women are not se­lected based on their ex­pe­ri­ence, com­pe­tence and in­tegrity but merely to coun­ter­act gen­der im­bal­ance.

It is im­por­tant that all the in­dices of board diversity, in­clud­ing gen­der, is recog­nised and im­ple­mented by com­pa­nies for their per­for­mance and value. In­ter­est­ingly, the nar­ra­tive may very well be chang­ing with the ap­point­ment of Mrs Ibukun Awosika as the Chair­per­son of the Board of First Bank of Nige­ria Hold­ings Lim­ited in 2015 as she be­came the first woman to hold such a po­si­tion on the board of the coun­try’s sec­ond largest lender.

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