Board configuration: are diverse boards better boards?

Abstract

Purpose The purpose of this research paper is to explore the proposition that diversifying the board in terms of gender, ethnicity or skill base may require consideration of the specific strategic environment of the organisation. The proposition arises from the question as to whether or not greater diversity in board configuration is desirable in certain circumstances and considers the group dynamics, skill mix and capabilities that are required by boards under different conditions of change and strategic complexity. Design/methodology/approach The study examines the financial performance of New Zealand publicly listed companies over a five‐year period and focuses on changes in board composition, strategic activity and implications for corporate performance. Findings The study finds limited support for the idea that board configuration, strategic context and corporate decision quality may be linked. Originality/value This paper will be of particular value to those involved in the appointment of directors within the private and public sectors. In particular, it focuses discussion on the strategic environment faced by the organisation and the relevance of a range of potential selection criteria when appointing new directors. It is also of interest to researchers evaluating the value of social capital and gender equity in contemporary organisations as, based on empirical reseach, it challenges conventional thinking. By implication, the paper also questions whether or not boards are actually able to influence key outcomes in the manner expected by legislators.

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