Corporate Governance in Economic Downturn – part 3
“Previously, a case for corporate board diversity was developed as a strategic move towards the improvement of governance in Caribbean corporations. The precedence was set and it was demonstrated that in order to efficiently and effectively make decisions in the best interest of the shareholders and other stakeholders; the diversity of our people must be reflected on our boards. However, issuing a call to action and observing a change in behaviour, is easier said than done.
“Our Caribbean people are often reluctant to change and by nature tend to associate with others that share similar characteristics. This behavioural trait is explained by sociologists as the theory of homophily. Homophily suggests that corporate board directors prefer to share board membership with other directors that possess similar individual-level characteristics. This results in board appointments being influenced by friendships, social preferences and peer referrals and exemplifies the well-known saying ‘Birds of a feather flock together’. Therefore, it is not strange that corporate boards across our islands are producing a ‘homosocial reproduction’, where board members reproduce their own characteristics by inviting similar individuals to join them.
“Consequently, this may be to the detriment of our corporations. The rationale is that directors prefer to associate with other board members with similar experiences, values, skills and background, because it is perceived that such individuals will have similar thought patterns and ideas, leading to less objections, a reduction in conflicts and faster decision making. However, it is often the different and apparent out of the box ideas that lead to increase innovation and the development of corporate strategies. These differences in thoughts and opinions, compels the board to explore opportunities and avenues that otherwise would not have been examined, thus creating a decision-making process that is robust and informed.
“Furthermore, it is the diversity in skills and experiences of our people that is necessary if our board directors are to make the best decisions and if they are to identify the opportunities and threats present in our business environment and align them with our organisational strengths and weaknesses.”
There you have it, part three of a four-week guest series titled “Corporate Governance in Economic Downturn” by Dr. Wendyann Richardson of the Refining Leaders Institute.
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