BOARD DIVERSITY AND EFFECTIVENESS: IMPLICATIONS FOR THE ROLE OF THE CHAIR

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Deryl Northcott ORCID logo, Janine Smith

https://doi.org/10.22495/cocv12i3c2p6

Abstract

This paper examines how social (ethnic and gender) diversity influences board effectiveness and impacts the role of the chair. It draws on semi-structured interviews with New Zealand board members from two company types - stated-owned enterprises (SOEs) and public listed companies (PLCs) - where the former has greater social diversity around the board table. Few prior studies of board effectiveness have accessed the views of board members via interviews, or compared directors’ perspectives from companies of similar size but differing board diversity. The findings reveal that members of SOE boards, where there is greater social diversity, saw negative director characteristics (character and attitude) and weak board relationships as strongly negative influences on board effectiveness. This group also identified poor boardroom practice (i.e. failing to achieve a boardroom atmosphere that fosters quality debate and effective decision making) as having a significant, negative impact on board outcomes. While board members in both company types saw the chair as a key influence on both board effectiveness and ineffectiveness, the ways in which the chair was seen to exert that influence differed between the company types, suggesting that diversity impacts the role of the chair as leader of the board.

Keywords: Board Effectiveness, Directors, Diversity, Gender, Ethnicity, Role of the Chair

How to cite this paper: Northcott, D. & Smith, J. (2015). Board diversity and effectiveness: Implications for the role of the chair. Corporate Ownership & Control, 12(3-2), 261-276. https://doi.org/10.22495/cocv12i3c2p6