Gender balance in boardrooms promotes good CSR policies

July 31, 2017
Source: thebftonline l Ghana
Gender balance in boardrooms promotes good CSR policies

There is a  growing concern over the government’s delay in constituting boards of governors of some state-owned enterprises (SOEs) and government agencies, seven months into office.  Whereas President Addo Dankwa Akufo-Addo is credited with constituting the fastest ever cabinet since the inception of the Fourth Republic, along with the appointment of managing directors and chief executive officers of (SOEs); his critics say, the delay in appointing governing boards for some SOEs with equal speed is an indication of the intense lobbying by power brokers to catch the eye of the President and his advisors.   

There are two opinions to this concern. The first opinion is that the delay in appointing the governing boards is creating problems at the state-owned enterprises and agencies, since some pressing decisions must be approved by a Board. Those holding this opinion argue that perhaps, the President has deliberately delayed the appointment of boards, so that the MDs or CEOs can implement some unpopular decisions, which the incoming boards will find tough reversing. The other argument is that the President is delaying the process of constituting the boards of directors in order to load them with party loyalists who would only do the bidding of the MDs and CEOs on behalf of the government.

I am not sure which of the two arguments has substance. Whatever the case, the president and his team of advisers have the prerogative to appoint boards of directors or governing boards of SOEs and agencies. As to whether or not the process is delaying is also unclear, since there is no constitutional or legal timeframe for boards to be constituted (I stand to be corrected).  Nonetheless, corporate governance rules impose some moral obligation on appointing authorities to ‘do the right thing’ and ‘do it rightly.’

My concern in this article however, is that of advocating for the qualified people, irrespective of party affiliations to be appointed to boards, in order to promote good corporate governance for the benefit of the population. My other concern is that of gender balance and equity in the appointment of boards. I am particularly interested in the number of women who are appointed to serve on boards, and the quality of the appointments too. I will illustrate why the orientation of boards and gender balance often influences good and inclusive corporate social responsibility (CSR) policies of SOEs.

The rationale for the type of leadership that seeks to direct corporate activities toward socially responsible goals is that corporations are granted power and status in society because of their ability to serve the greater good of society (or the so-called stakeholder theory).

In contrast to the ‘Shareholder Theory’, the ‘Stakeholder Theory’ takes into account the individuals or groups with a ‘stake’ in or claim on the company. In a very general sense, stakeholders are groups and individuals who benefit from or are harmed by corporate actions. From this perspective, the notion of CSR means that ‘corporations or SOEs have an obligation to constituent groups in society, other than stockholders and beyond that prescribed by law or union contact. This is why there is growing advocacy for putting more women on boards or executive positions because of their penchant for promoting good corporate citizenships.

Composition

With the increased public scrutiny around boards and corporate governance, one expects board composition to affect corporate reputation, especially when it comes to characteristics, such as the diversity of board resources and board gender composition. In a study of the composition of  Board of Directors and CSR, Hyun  et al., (2016) found that instead of focusing on personal attributes of decision-makers, other researchers in the management field have turned their attention to the group-level characteristics of decision-making bodies within an organization to shed further light on antecedents of CSR. In particular, they have examined how certain features of the board of directors (BOD) affect a company’s involvement in CSR activities, finding that differences in CSR efforts and performance are partly explained by differences in the structure and composition of the BOD. In short, the size of the board and its balance matters in promoting good corporate governance.

 

The authors found that, the number of independent directors was considered an important element in the successes of CSR. Also increased board capacity, which is likely to be attributed to the increase in the number of independent directors, tends to improve the firm’s CSR performance.

 

 

Women on Boards and CSR

Another set of findings that has attracted much attention, concerns the impacts of board-level diversity, particularly gender diversity, on firms’ CSR efforts and performance. The conventional explanation for the CSR-promoting role of women leaders (i.e., board of directors) is rooted in the long-standing idea that women, in general, are more ethically sensitive and empathetic to pressing social issues, than men (Hyun et al., 2016).

 

Gender diversity as one of the aspects of board diversity gained a significant importance in corporate governance literature, and advocates of diversity argued that diverse boards may have better understanding of complex issues as compared to homogenous boards. Thus, there is a positive association between the number of women on board and CSR disclosure (Naseem et al., (2017). This is not the case in some cases, where female CEOs or board members have been deeply involved in corrupt practices, as well as connivance or supervising poor corporate governance practices, if any.   

 

 

Generally, though;  the gender socialization theory, (a prominent theory on gender differences), posits that men and women are different in their orientation toward moral principle, largely because women have better internalized ethical and communal values through their social roles (ibid).

 

 

Ample support was found for this conjecture, indicating that women tend to have stronger moral standards and ethical stance than men. For example, Eagly and Carli (2003, in Hyun et al., 2016), in their attempt to link social role theory to the theory of leadership, suggested that communal orientation—including aspirations and values of being helpful, kind, sympathetic, interpersonally sensitive and nurturing—are more frequently found in women.

 

The authors continued to argue that such differences are likely to be reflected in women’s various leadership roles. Similarly, Ibrahim, Angelidis and Tomic (2009, in Hyun et al., 2016) showed that female managers tend to exhibit more positive attitudes toward the adoption of an ethics code in their organization and hold more confidence that the ethics code will raise moral standards in their business operations. Together, this stream of research suggests that female leaders are more likely to have concerns for other stakeholder groups. As such, it is reasonable to expect that female independent directors will embrace their company’s CSR more strongly than male directors, actively engaging in issues corresponding to the welfare of non-shareholding stakeholders.

 

Corruption

Another research showed that as female representation on boards increased, the level of corruption in their sample companies declined (Naseem et al. (2017).

In testing their first hypothesis, they found that the greater the number (or proportion) of women independent directors, the better a firm’s CSR performance. Further, they hypothesized that female independent directors are more likely to express their concerns about CSR, and such concerns will gain more support from other members of the organization.

 

Equally significant is the influence female CEOs are likely to have on CSR.  Naseem et al., (2017) further argue that the effect of the number of female top executives on the CSR score is not significant in many countries, perhaps, including Ghana, where the ratio of men to women in top executive positions, quite expectedly tilts in favour of men. In other words, the researchers are pushing for a conscious effort to put more females into both boards of directors and CEOs positions.  In Ghana, the current President, Addo Dankwa Akufo-Addo has earned international acclaim for appointing women into top positions, both as ministers and CEOs. For that, the Africa Union recently homoured the President with the 2017 Gender Champion Award. The award was in recognition of President Akufo-Addo’s recognition of gender equality at the continental level.  I expect the trend of gender balance in the appointment of women into top positions to continue into the first tenure of his presidency; at least for sake of promoting good corporate practice.

 

Governance Gaps

However, of particular relevance for developing countries is the fact that CSR is often seen as a way to plug the ‘governance gaps’ left by weak, corrupt, or under?resourced governments that failed to adequately provide various social services (housing, roads, electricity, health care, education, etc.). Perhaps, in the absence of strong governmental controls over the social, ethical, and environmental performance of companies in developing countries, activism by stakeholder groups has become another critical driver for CSR.

Social expectations

When thinking about emerging expectations in the area of CSR, one significant trend that should be considered by boards is the increasing societal expectation that companies should respect human rights in their operations. All over the world, there is a pronounced and fundamental shift in stakeholder expectations with regard to managing, mitigating and preventing adverse human rights impacts.

In March 2011, the UN Special Representative on business and human rights, John Ruggie, released his Guiding principles on business and human rights in which he provides guidance to companies seeking to implement respect for human rights in the management of their business operations. These principles, based on a business and human rights framework first announced by the Special Representative in 2008, reflect the emerging expectations of many key stakeholders, including governments and international financial institutions.

Thus, Boards looking to understand the potential impact of changing stakeholder expectations with regard to companies and human rights should take note of one of the core elements of the guiding principles: human rights due diligence. This involves the implementation of policies, assessment mechanisms and internal oversight and control systems to identify, prevent and address the actual and potential adverse human rights impacts associated with a company’s operations.

 

 

 

References

 

Bear, S. Rahman, N. and Post, C. (2010) The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation. Journal of Business Ethics.

Hyun, E.  Yang, D., Jung, H and Hong, K. (2016) Women on Boards and Corporate Social Responsibility. MDPI.

Naseem, M,A,  Riaz, S.  Ur Rehman, R Ikram, A. and Malik, F (2017) Impact of Board Characteristics on Corporate Social Responsibility Disclosure. The Journal of Applied Business Research.

(***The writer is a Communications and Development Management Specialist, and a Social Justice Advocate.  All views expressed in this article are my personal views and do not represent those of any organization. (Email: safoamos@gmail.com. Mobile: 0202642504/0243327586/0264327586)