Corporate governance determines performance, productivity and efficiency of organizations. The organizations with experienced and competent corporate leaders have a higher chance of gaining a competitive advantage in both domestic and international markets. Against the backdrop of diversity and female leadership, there has been significant attempt to incorporate women into senior leadership of corporate organizations. It is believed that organizations with diverse board structure are managed properly, and can achieve exemplary performance. This paper, therefore, looks into corporate leadership, by summarizing two articles and analyzing five articles. In addition, the paper will use organizational and institutional theories to analyze issues raised in the two summarized articles.
ASX200 boards near 30pc gender target: AICD by Sally Patten
In summary, this article reports the dynamics of female corporate leadership in 200 best companies in Australia. The women are joining the boards of companies in Australia, amid concerns about the number of women in top corporate leadership. Statistically, the article intimates that in 2017, only 25.4 per cent of women were on boards of 200 biggest companies in Australia, but in 2018 the percentage shot to 28.5 percent. This was a three percent improvement, which in all probability was a great improvement. This rise is an improvement the author describes a sharp increase in the number of women in senior leadership.
Although, small companies according to the author are not making significant improvement at the board level. However, this is a tremendous success in the senior leadership of women in Australia’s biggest corporates. From this article it is becoming apparent that ASX200 companies are trying their best to incorporate women into corporate leadership. It is a good gesture and something to pride about especially at this time when people across the world are supporting women empowerment and their inclusion in corporate leadership. Besides, this article is relevant in the practice of corporate governance in organisations, because it underscores the fact that women can also lead. It is also relevant owing to the fact that it addresses diversity in the corporate governance. Women are viewed as capable as men, and therefore this article is pertinent because it draws people recognizing the contribution of women in corporate governance.
Company boards are stacked with friends of friends so how can we expect change? By Sherene Smith
The article discloses that the appointment to the board of directors or top leadership in the organizations require social connections. The individuals who have networks with senior people are likely to be appointed to senior leadership positions in corporates. Two-thirds of board appointments in the largest 200 public companies in Australia were associated with social connections. The author cites that the person to replace the ex-AMP chairwoman Catherine Brenner would be got from possible a small group of people.
Brenner was working at Financial Services Royal Commission and resigned following accusations of misleading legislators and other multiple scandals. The author reports more resignations were expected at commonwealth bank following that of Brenner after learning that the board of directors was made up of people in the same social circles. Further, the article agrees that board diversity is improving. But, raises a concern that some genuine and qualified people especially women are excluded due to lack of social connections.
This article is also relevant to the practice of corporate governance in organization, because it is stresses challenges faced in achieving diversity. The corporate governance diversity within organization it is supposed to be given to women who are qualified. However, citing the case of Brenner, it appears that she must have been promoted to the chairwomanship of the Financial Service Royal commission due to her social connections. Thus, the article seeks to address challenges that come with diversifying corporate governance in organizations.
Stakeholder Theory
The appropriate theory for the above article is organizational theory. Theory addresses how to identify structures or patterns to apply in solving problems within organization (Capper 2018 p.9). The patterns or structures with organization can be utilized to improve productivity and efficiency in order to meet shareholders’ expectations. Based on the article it is reported that the Australian largest companies are recruiting women into board or senior leadership positions to diversify and improve management. The research by Post (2015 p.1154) informs female leadership is associated with cohesion on larger and more functionally diverse teams and it is linked to cooperative learning and participative communication. Cohesion among teams within an organization is important; because it can improve productivity, enhance work flow and efficiency. Hence, the organizational theory can be used to explain the above article in the sense that it is informing how organization can leverage female leadership in organizations.
In the recent years, organizations have been considering how to incorporate female leadership into their operations. It is by this that organizational theory informs the organizations on the appropriate way to improve its structures and diversify it. A diversified organizational leadership with female employees at the board level would benefit from good decision making and relational skills (Hoobler, Lemmon, and Wayne 2014 p. 703). The good decisions and relational skills will enhance effectiveness of teams in productivity. More importantly, women inclusion into senior leadership is becoming an issue of urgency to most organizations. Organizations that use the organizational theory are likely to be concerned the right pattern or structure they believe can improve efficiency and productivity, which in turn increases profits.
Company boards are stacked with friends of friends so how can we expect change? By Sherene Smith
Institutional Theory
Institutional theory of organizations is appropriate to this article, because it underscores institutional changes. The institutional theory underscores that changes are important within organizations, and raises the problems that need to look into when organizations go through some changes (Cook, and Glass 2014 p.91). In this article, organizational diversity is becoming an inevitable topic; however, there are problems that are emerging amid the changes. One of the problems mentioned in the article is that company board of Commonwealth was filled by people with social connections. That is to say that even Financial Services Royal Commission chairwoman, Brenner must have got the position through social connections. According to Peters (2000 p.13) the institutional change requires that an organization looks into its values and structures as well. That is why, the diversification of board of directors is addressing institutional change, but it has to look into values. If ethical values like integrity are considered during hiring or appointment of women to top leadership, the right women shall get top leadership positions merit. Fundamentally, when implementing institutional change, the focus is to improve the content of what institutions do or what they believe. For this reason, the institutional theory is important to the article, for the fact that it informs the organizations the sense of implements changes like diversity and inclusion of women in an ethical manner.
In the article by Patten (2018) the major issue that came out is increased number of women in Australia’s biggest 200 companies. This issue could be summed up as a remarkable rise of women to corporate leadership. It is good news to hear that Australia is recognizing the ability of women to lead and manage organizations. It is not just an achievement for women, but this is an achievement for women empowerment, which both men and women support. Similarly, the article by Smith (2018) also indicates that diversity is being made in the company boards. This is something also to celebrate; however, the article is raising an important issue of nepotism surrounding the emergence of women in the company boards. This is a critical issue that is posing a challenge to appointment of women to top leadership. There are women who are qualified to lead organization and make wise decisions necessary for organizational management. Perhaps, the appointment of Chairwoman, Brenner cited by Smith (2018) to the top leadership of Commonwealth Bank was due to social connections. All in all, the article by Smith (2018) highlights the challenges like social connections denting efforts to promote more women to senior leadership.
The article by Swan (2016) is bringing out comparison between experienced shareholders and independent directors. Based on the article, the author is mooting an argument on whom between the experienced shareholders and independent directors should make up the board structure. According to Swan (2016) experienced shareholders can engage in swing trading, while independent directors usually do not have enough experience in a specific area. As a result, experienced shareholders need to be considered in the board structure rather than independent directors without specific experience in a particular field. Shareholders if made the board of directors are likely to understand the price changes in the market, and this helps them run an organization profitably. But, independent directors, despite being professional directors, they seem not to have specific experience that may benefit the organization if they are board of directors. This is due to their involvement in different businesses. Nonetheless, in the article by Greber (2018) the issue of sacking the CEO, Elon Musk and privatizing Tesla is associated with disappointment in failed senior leadership. A C.E.O, who is performing well and keeping the organization afloat and profitable, is not likely to be sacked. Thus, the issue here is challenges that senior organizational leaders face in case they fail to perform to expectations, especially of shareholders. Clearly, Musk wanted to privatize Tesla, but the fact that the shareholders told him not to do so, brings out the aspect of shareholders’ influence in decision making. Similarly, the article by Frost (2018) is related to that by Greber (2018), because they both raise the concern of bad management. Based on these articles when shareholders or organizational performance dwindles, it is usually associated with bad leadership or management and in reaction the shareholders are likely to demand for the sacking of the top managers.
I recommend that the organizations need to do background checks on job candidates for managerial positions to avoid giving jobs to female leaders based on nepotism or social connections in order to have effective corporate governance systems. Senior leaders in organizations should prioritize consultation with shareholders before making decisions to effectively improve corporate governance systems.
Conclusion
In summation, it has come out that women are taking up top positions in the organizational management. It is a great achievement to have women occupy senior leadership positions to work with male colleagues to steer corporate organizations in the right direction. For many years corporate governance has been a reserve for male professionals, but that is changing owing to the fact that board structure is getting egalitarian. However, as the push for women inclusion in the top organizational leadership gains momentum allegations of social connections are locking out competent and qualified women. Women with social connections are likely to be appointed to sit in the board of directors, rendering the appointment of some women to senior positions an act of nepotism. Besides, the articles have intimated that the top leadership of every organization is central. Due to that corporate governance requires that both male and female managers work collaboratively to increase productivity, efficiency and performance of organizations.
References
Cook, A. and Glass, C., 2014. Women and top leadership positions: Towards an institutional analysis. Gender, Work & Organization, 21(1), pp.91-103.
Capper, C.A., 2018. Organizational Theory for Equity and Diversity: Leading Integrated, Socially Just Education. Routledge. Frost, James. APRA Chairman Wayne Byres say Banking Executive Pay is out of step and must Change. Financial Review-Afri.com.
Greber, Jacob. 2018. Is Elon Musk Running Out of Time at Tesla? Financial Review-Afri.com.
Hoobler, J.M., Lemmon, G. and Wayne, S.J., 2014. Women’s managerial aspirations: An organizational development perspective. Journal of Management, 40(3), pp.703-730.
Patten, Sally. 2018. ASX200 boards near 30pc gender target: AICD. Financial Review-Afri.com.
Peters, B.G., 2000. Institutional theory: Problems and prospects. pp. 1-18. Retrieved from: https://www.ihs.ac.at/publications/pol/pw_69.pdf
Post, C., 2015. When is female leadership an advantage? Coordination requirements, team cohesion, and team interaction norms. Journal of Organizational Behavior, 36(8), pp.1153-1175.
Smith, Sherene. 2018. Company boards are stacked with friends of friends so how can we expect change? PhD Student, RMIT University.
Swan, Peter. 2016. Experienced Shareholders better than Independent Directors for Business.
Professor of Finance, UNSW. The Conversation, the Academic Rigour, Journalistic Flair.
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