Good corporate governance is defined as the structures and processes by which companies are directed and controlled. It helps companies improve on performance by operating more efficiently to remain sustainable.
Boards of companies ensure that companies are run in the best possible way to ensure that the interests of the stakeholders are protected. However, most boards lack the balance when it comes to female representation.
Empirical evidence suggests that the problem cuts across continents. Men hold about 80 per cent of all board seats for companies in the Standard &Poor’s (SP) 500 Stock Index.
Growth in female representation on those boards has slowed. European countries have instituted formal mandates, sometimes backed by fines, to narrow a similar corporate-board gender gap. Then there is Asia, where women held only 12 per cent of seats in 2016.
Legal directives raised female representation on corporate boards in large, publicly listed companies in the European Union (EU) to 23.3 per cent in 2016 from 11.9 per cent in 2010.
In the United States (US), the pace at which women were added to Fortune 500 boards slowed to about two per cent yearly after a decade of five per cent annual growth ended in 2005. In the United Kingdom (UK) and Finland, public shaming by advocacy groups has stirred some shareholders to call for a change.
Elsewhere, in the absence of legal or activist pressure, the make-up of boards has hardly changed. The US technology sector is lagging: A quarter of Silicon Valley companies had no female directors according to a 2016 survey.
Some organisations, including the EU, make an economic argument for the integration of women in leadership. They say gender diversity reflects a world where females make up 70 per cent of purchasing choices and that it results in better decision making.
A Credit Suisse study showed that companies with at least one woman as a board member saw an average return on equity of 14.1 per cent from 2005 to 2015. Where boards were made up of only men, average returns were 11.2 per cent.
In Ghana, a report of a survey on women on boards of corporate and public institutions showed that companies that performed better tend to have more gender-balanced boards. Also high-performing institutions, based on return on assets, were associated with higher gender diversity compared with low-performing firms.
These findings provide useful pointers for regulators, policymakers and companies in influencing recruitment for top executives and also board appointments.
We agree with the findings that appointing female chief executives and board chairpersons can go a long way towards improving the presence of females on boards, because it provides role models and pacesetters whom younger females can look up too.
This is also because women who are serving and have served on boards can help mentor the next generation of women who will serve as business leaders.
We applaud the International Finance Corporation, the Swiss Secretariat for Economic Affairs and the University of Ghana Business School for their efforts in undertaking the study.