Corporate Governance in Economic Downturn – part 4
“Over the last three weeks, Dr. Wendyann Richardson examined the state of governance in our Caribbean corporations. In this week’s article, a solution is presented to improve our corporate governance by ensuring that our corporate boards are more diverse.
“It has been established that the homophily fuelled problem of homogeneity is present on corporate boards in the Caribbean.
Furthermore, we can safely say that homophily and diversity are opposing forces, where the presence of one reveals the absence of the other. The global statistics of corporate board diversity demonstrates that despite the undeniable benefits of diverse boards, many corporations are fixated on the familiar and status quo. For instance, age diversity ensures succession planning in Caribbean corporations, however, because of the usual course of career development most directors are only appointed to the board near to retirement. Similarly, functional skill diversity facilitates the advantageous use of various experiences, expertise and skills necessary for efficient decision making and improved corporation performance. This ensures that the 1970s fall of Rolls Royce is not repeated by our corporations. Many believe that Rolls Royce’s homogeneous board of engineers did not have the expertise necessary to combat the financial challenges of the day.
“In light of the recent economic challenges facing our Caribbean corporations, is it now enough to present our corporations with the information and leave the survival of our people up to them, on the premise that ‘you can take a donkey to the standpipe, but you can’t force it to drink’? Certainly not! An alternative would be to call on our regulators and our compliance boards and authorities to intervene and demand that in the best interest of our already fragile economies, greater emphasis be placed on the governance of our corporations. In particular, on the composition of our corporate boards by ensuring that the ‘old boys club’, the societal aristocrats and the business professionals who all sing from the same song sheet, no longer, have exclusive rights to the boardroom.
“Furthermore, our regulators must make certain, that individuals that are highly qualified and skilled are not denied board membership purely because they do not form part of the small pool of corporate elites, with multiple directorships that we have come to know so well. Instead, ensure that these ‘outsiders’ are given an equal opportunity to make a vital contribution to the sustainability and development of our corporations.”
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