By Lori-Ann Bernard
A company’s Board of Directors (BoD) manages and organizes the business and its activities. The board is responsible for implementing initiatives and developing and applying the company culture; This includes the company’s ethics and values, its views on collaboration and teamwork, and the various perspectives applied in the decision-making process. The composition, or the members of the BoD, greatly influences the perspectives applied by the business. Therefore, aspects of company culture are influenced by the diversity–or lack thereof–on the board. When referring to diversity, this includes a candidate’s gender, age, race, nationality, and even professional/educational background (HBR).
Over the past few decades, researchers have evaluated the effects of increasing the number of women on a company’s board. More specifically, how many women are needed for their input to impact company initiatives and decision-making? Harvard Business Professor, Rosabeth Moss Kanter, developed the Kanter Management Theory, which “proposes that employees exhibit different behaviours based on whether certain structural support exists” (business.com). When looking at women’s impact on decision-making in the workplace, the proper organizational structure and culture must be in place for their perspectives to influence the majority opinion. As previously mentioned, the culture is developed at the level of the BoD.
Further, several experiments in social psychology, such as the Asch Conformity Experiment (1951), have shown the tendency of an individual to conform to the thinking of a majority group (Simply Psychology). In the Asch experiment, an unaware individual was asked to select a matching pair of lines in front of a group, unaware the others were actors who were given a selected, wrong pair to answer. In their findings, about 75% of individuals were seen to conform to the majority decision at least once (Simple Psychology). This experiment, however, contains bias as the group was composed of individuals of the same age and gender; Therefore, the experiment’s results do not consider how members of other social groups would have reacted in this context. Despite this, the questions explored through the Asch Experiment compare to the questions raised by Kanter’s theory: to what extent would a member of a minority group be pressured to conform to the decisions and perspectives of the majority? When would their difference in perspective and ideas be felt in further decision-making?
The idea of quantifying the impact of the less populous social group in a workplace context is further explored with the Critical Mass Theory. Critical Mass Theory began as a physics theory where a certain “tipping point” or boiling point marks a threshold where a reaction would exponentially start to affect its environment (Farnam Street). When looking at this idea in a business context, it can be related to the level of diversity within the company. In many cases, research shows that a minimum of three women is necessary for their impact or presence to be felt in the decision-making process (Virtus Journal). When suggesting the number three, this refers to the point in which a minority group’s presence can truly be felt–though, of course, this is assuming all members of the minority group have the same views/beliefs as well as dedication to the issue(s) at hand. However, a BoD’s structure and organization depend on the context in which the company is functioning (the industry, the products, the mission, etc.). As three defines the creation of a group in a greater context, this is simply the number used to identify the initial impact of the group. Does this mean that three is a threshold or “tipping point”? No, not necessarily. To simplify, this is the point at which, ideally, members of the minority group would come together and gain confidence in expressing and pushing their ideas in the greater conversation dictated by the majority group.
Looking further at finding what value can be applied to the threshold, research varies in claiming a percentage of the group. In a more general social context, researchers have historically claimed that 10% is needed to form a minority group that can cause a shift in the existing social conditions (Science Magazine, Farnam Street). As more significant research began focusing more narrowly on women on the board of directors, the ratio for greater impact on decision-making changes to about 25–30% is required (Science Magazine, Virtus Journal). In discussion, 30% is the goal often set by organizations because, as defined by the global campaign The 30% Club, it is the fraction at which a group ceases to be the minority in terms of number. Additionally, once the threshold is reached, the observed impact of the minority perspective has been shown to exponentially affect a shift in the status quo to include this new perspective. It is said to be the point at which their perspective becomes ingrained in the company culture and decision evaluations.
Now, with the threshold defined, how do we get there? While we have seen the success of the implementation of quotas in Europe, there have been many obstacles preventing the implementation of such quotas in the United States. When looking at Europe, certain states–specifically Norway, France, Italy, and Sweden–have used quotas to increase the presence of women on boards. These laws and regulations have successfully led to the average percentage of women on BoDs reaching 35% in these countries (Forbes). Further aligning with SDG Goal #5 of increasing gender equality, the EU is looking to set quotas to raise women’s representation on boards to 40% by 2026 (The Guardian). Unfortunately, despite efforts in some states to implement quotas and minimums to decrease the gender gap in the United States, quotas of this kind have been deemed unconstitutional (Forbes).
Additionally, many companies are against quotas claiming that it creates too much demand for a resource pool already in short supply. Arguably, this perspective demonstrates the issues of tokenism–the action of selecting a candidate for a position on the board solely to improve the board’s diversity. Having a homogenous board can limit the perspectives or outlooks felt in decision-making, including candidate searches. With these issues persisting, quotas are one possible method for ensuring the implementation of newer hiring procedures by businesses to develop more diverse boards.
Additional References:
https://corpgov.law.harvard.edu/2022/05/29/board-gender-diversity/
https://www.mdpi.com/2071-1050/12/21/9298/htm