Gender diversity in corporate boardrooms: why does it matter?


“If Lehman Brothers had been a bit more Lehman Sisters … we would not have had the degree of tragedy that we had as a result of what happened” – Christine Lagarde, President of the European Central Bank

Contemporary times have witnessed regulators, policymakers and advocacy groups in many parts of the world mounting increased pressure on companies for greater board diversity as part of a deliberate effort to advance good governance and efficiency. This reformist crusade has gradually forced boards to reorganise their composition. Surely, the pressing calls for the promotion of higher levels of diversity and greater inclusivity have yielded substantial bargains, noticeable in global corporate culture.  This is however not the case. Irrespective of these targetted efforts at fostering a modern and sound transformation of the corporate governance arena, little progress has been recorded as women continue to be considerably under-represented on companies’ boards of directors in virtually all quarters of the world.

In Ghana – as contained in the 2022 Board Diversity Index Report released on November 2, 2022 by TheBoardroom Africa in partnership with the Ghana Stock Exchange (GSE) – among the 35 companies listed on the Ghanaian Stock Exchange, a meagre 25% of board seats are allocated to women and only 27% of the non-executive director seats are occupied by women. The report indicates that these figures remain unchanged from 2021, reflecting a stagnated or stalled growth in extending the breadth of gender parity in boardrooms in Ghana.

More so, these rather disappointing statistics lend a voice of legitimacy to the proposition that pervasive gender imbalance in arts, economics, politics and science is a core constituent of a broader lack of board diversity in Ghana. Although the report highlights that a significant number of Ghanaian listed companies have responded positively to calls for embracing more gender-diverse and inclusive boardrooms, the general gender gap among senior executives stands remarkably broad. Invariably, this indicates that Ghana has a great distance to cover in achieving sustained and balanced gender diversity at the highest corporate leadership level.

Exploring the Importance of Gender-Balanced Boards

Diversity, in all its manifestations, is a key ingredient in the recipe for effective board composition and operation. Corporate governance researchers have often identified an inextricable link between board diversity and its impact on overall performance of the business firm.  The ethos of good corporate governance for conducting competent modern business dictates that it is decisive for boards to have the right balance of skills, knowledge and experience, as well as gender, racial and other forms of diversity.

Historically, corporate board rooms have predominantly been all-male syndicates. However, quite recently, the significance of this practice has been fervently challenged, given the vast repository of benefits accrued from the promotion of more gender-balanced and inclusive boardrooms. Popular empirical evidence tends to hold that gender-diverse boards offer substantial benefits to a company, by refining and adding value to business decisions, reducing risk and sustaining profits growths.

A 2018 study conducted by McKinsey & Company emphasised that business firms with boardrooms and top management comprising a greater proportion of women, and whose top management positions are occupied by women, significantly outperform rival companies with fewer women occupying the aforementioned roles. A gender-balanced board has the propensity to better-understand its customer base and the setting in which the business functions. This enhanced understanding ensures the board is properly situated to find and seize opportunities for innovation, which ultimately creates value for the business.

Moreover, it is observed that gender-diverse boards reduce the frequent sequence of ‘groupthink’ – which is a phenomenon whereby directors easily reach a consensus or arrive at business decisions primarily due to their shared similarities.  This leads to poorer quality decisions because sound alternatives are often dismissed.  A diverse board makeup however encourages healthy debate in the boardroom. For example, a study by Rost & Osterloh (2010) revealed that when faced with uncertainty, information processing by men who are financial experts appears to be worse than that done by women who are not financial experts.

Stretching board diversity beyond the tenets of traditional good corporate governance would accrue substantial benefits for risk management when crisis beckons. Perhaps Ghana’s 2017 banking crisis could be have been averted if board-level positions were occupied by a greater proportion of women? Who knows? The staggering US$3.5billion expense of the banking clean-up exercise solely shouldered by the government of Ghana could have been put to prudent educational or healthcare infrastructure use for the benefit of all Ghanaians.

Furthermore, women generally tend to be more accountable and transparent in fiscal matters compared to their male counterparts.  A recent study conducted by Morgan Stanley Capital International (MSCI ) confirms this proposition by finding that business firms with a greater fraction of women on boards are less likely to suffer governance-related scandals, such as bribery, corruption and fraud.

Gender-balanced boards are therefore encouraged to detect criteria for calculating strategy, examining its implementation, scrutinising conflict of interest parameters, and ensuring the propriety of transactions. Given the advantageous returns of gender-balanced boardrooms, Ghanaian companies must therefore earnestly embark on private initiatives to broaden greater female representation on their boards to boost business profits and credibility, and reduce governance scandals that may depress professional confidence and reputation.

Measures for Promoting Gender-Balanced & Inclusive Board Rooms in Ghana

The adoption of pragmatic efforts to promote diversity – in all its forms in Ghana – is sacrosanct. It is advised that Ghanaian companies, the government of Ghana and Ghana Stock Exchange embark on a collaborative and proactive public policy journey to promote the increase of boardroom diversity, as it is desirable and consistent with dictates of equality and fairness enshrined in the 1992 Constitution of Ghana.

Companies in Ghana must be constantly encouraged to adopt measures that improve gender-balanced boardrooms. Public & private stations must be continuously made to reinforce the motivation of setting diversity targets and disclosure requirements to drive female representation at a board level in Ghana. Enhancing greater boardroom diversity in Ghana can be achieved by encouraging, if not mandating, all 39 board chairmen/chairwomen of companies listed on the Ghanaian Stock Exchange to publicly declare a set percentage of women they aim to include on their boards by the end of 2027.

It is confidently believed that setting sustainable, practical and effective gender quotas will pragmatically address the evident gender imbalance in Ghanaian companies. It is important to highlight that better policy outcomes are achieved with gender quotas backed by some legislative instrument. In 2020, European countries with statutory quotas experienced a tremendous increase in the representation of women on their listed company boards (37.6%) compared to (24.3%) in countries with no mandatory quotas in place.

Linked to this, another measure that can be implemented to spur the transformation of boardrooms in Ghana and address the pervasive gender disparity is the introduction of legislatively backed gender scorecards, through which the diversity of companies is measured. If the score of companies, as measured using these scorecards, has direct business consequences – such as the ability of companies to obtain operation licences or be awarded government contracts, companies will be incentivised to transform their boards.

Listed companies on the GSE, on an annual basis, should be required to publicly share the proportion of women sitting on their board in senior executive or management positions, and the entire number of female employees in their firms.

Lastly, companies must document defined and transparent board appointment processes with objective assessments based on merit, irrespective of gender. It is suggested that two sections of female populations be considered in the board appointment process – Female executives from within the corporate region & women outside the corporate ordinary; e.g. academics & civil servants.

These recommendations if pursued vigorously are sure to enhance overall board effectiveness in Ghana, as gender-conscious board boardrooms are known to drive financial proficient understanding and greater insights into markets, customers and business opportunities. As a cautionary tale, companies/government should not implement the suggested measures in a tick-box-like manner. Rather, we should strive to implement sustainable, effective and inclusive measures to transform Ghana’s corporate culture, board composition and overall business environment.

The writer is a Solicitor-in-Training, England & Wales & an African Global Scholar at the Lancaster University Law School, United Kingdom. His research interests include risk management and regulatory practice, performance measurement and management control and corporate social responsibility.

Leave a Reply