Gender and Corporate Governance in Public Organizations
KeywordsCorporate Governance Gender Stereotype Stereotype Threat Public Organization Supervisory Board
Gender and corporate governance within public organizations represents a relevant topic in organizational research related to the female representation in boards and top management positions in local administrations and state-owned organizations.
Diversity represents an important research domain for organizational studies, especially because of the greatest phenomena that occurred in the world, that is, the globalization, the internationalization of enterprises, the financial and economic crisis, the demographic changes in the workforce, and the increasing complexity of jobs. In many countries, the diversity debate is mostly focused on the role of women in the workforce, as outlined by the spread of “affirmative actions” and “equal opportunity programs” to support the role of women within organizations. Despite their relevant socioeconomic progress in the last decades, women still face inequalities in compensation and status, and they are underrepresented in top management positions.
In European countries, the percentage of women in leadership positions was dramatically low until recently, both in public and private sectors. In many European countries, the improvement process is underway thanks to the introduction of government laws to promote women’s representation in the boards of companies listed on the Stock Exchange and in companies owned by the public administration.
Although the increasing gender balance at board level was more than doubled from 2,8% in October 2011 to 7,1% in April 2015 (European Commission 2015), there is still an intensive public debate in research and practice on the concrete participation of women to board of directors’ processes. Thus, it seems that women directors do not really play a relevant role in decision-making process of board of directors, also because maybe the qualification and merit criteria are not merely applied.
Women Progress Driven by Regulatory Pressures: State of Art
In recent years, numerous European States passed a legislation that requires a gender quota for board of directors (Terjesen and Singh 2008; Francoeur et al. 2008). As first mover, in 2003 Norway prescribed a minimum target of 40% gender quota on board of directors in all public companies, as well as state-owned enterprises, becoming mandatory since 2006. Subsequently, Spain and Iceland followed Norway’s footsteps. In Spain, this legislation was applied in 2007 to publicly listed companies and companies with more than 250 employees, to be completed by 2015. Iceland passed the law to all publicly listed companies and companies with more than 50 employees, which were required to have at least 40% of each gender represented on their board, starting in 2013 (Teigen 2012). In 2011, France, Netherlands, and Belgium adopted the corporate board quota legislation for private companies. In Italy, the quota law was approved in 2011 for publicly listed companies and state-owned companies where one-third of the seats on boards and supervisory boards were reserved for women since 2015. Indeed, the Golfo-Mosca was approved in Italy requiring the equal representation of women, at least one-third of the members of corporate boards, in public companies. Recent data from the Bellisario Foundation calculate that in 2016 there are about 800 women in the corporate boards and 200 in the boards of auditors. Furthermore, since 2015, with the second term, the mandatory gender quota will become 30%. According to estimate reports by the Bank of Italy, without a binding law, we would achieve gender parity in 2075 (Bank of Italy 2012; Bianco et al. 2013).
These values have been changing the mind of many skeptics, contrary to quotas because they feared that the choice on the basis of the gender would not depend on meritocratic criteria. But it is difficult for women to prove their worth if they cannot reach the positions to do it. The idea, outlined in Europe and the United States, is that companies, where there is more women not discriminated based on gender, are more open to work-life balance. According to a study recently published by Aspen Institute Italia (2014), companies with more women at the top positions have better withstood the economic crisis. The Bellisario Foundation wants to extend the threshold of 20% even at 4000 companies controlled by local authorities.
However, only few countries have adopted penalties for violations about gender quotas. For instance, Norway and Italy adopted a system of progressively serious penalties for noncompliance companies, including the payment of a pecuniary penalty, the cancellation of board members’ compensation, or the revocation of board membership.
In 2012, considering the limited success of this legislation (the percentage of women on corporate boards increased from 12.5% to 20.7%), the European Commission proposed a mandatory directive to apply to executive and non-executive directors of listed companies in private sector and state-owned companies. The overall goal was to achieve a minimum representation of 40% of women by January 1, 2018, for state-owned listed companies.
A central point of the proposal is the requirement of a transparent and objective recruitment process which requires specific details about “clear, neutrally formulated, and unambiguous criteria” for board selection (European Commission 2012, p. 1; Oliveira and Gondek 2014, p. 5). The law stipulates that if two candidates are found to be equal according to the criteria, the member of the underrepresented gender must be chosen. In addition, the proposal establishes an audit system; the companies must provide annually information and specific data about the gender representation in their boards, as well as measures applied for ensuring a transparent recruitment process. This information must also be published on their website to ensure that it is accessible to anyone interested. Each member state would determine which sanctions could be imposed on companies that do not comply; these measures must be “effective, proportionate, and dissuasive” (Oliveira and Gondek 2014, p. 7).
Group Dynamics in Board of Directors
Board of directors represents the most important governance mechanism, with the relevant purpose to support management through counseling and advice and to protect stakeholders against managerial misconduct. According to Forbes and Milliken (1999), boards of directors are large, elite, and episodic decision-making groups that face complex tasks pertaining to strategic-issue processing. Because boards mainly produce a cognitive output, such as strategic decisions, they require a high degree of specialized knowledge and skills to operate effectively. Drawing from the literature on group dynamics, most empirical studies suggest that demographic diversity in these groups – many persons with different backgrounds, experiences, competencies, and culture who meet together to deal with complex problems – may be advantageous to the decision-making process, because the greater range of perspectives and specialized knowledge and skills provided by heterogeneous members promotes more information search, the identification and critical examination of major decision alternatives, creativity in decision-making tasks, and performance gains (Watson et al. 1993; Jackson et al. 1995). In this perspective, the presence of female directors, as minority group, may contribute to board decision-making process by providing alternative perspectives and prompting divergent thinking among the majority group (Torchia et al. 2011). However, women could play a crucial role in making diversified boards more effective and contributing to better decision-making processes, depending on the board ability to tap available knowledge and skills and to guarantee active participation of all members in bringing their perspectives to the group debate (Buonocore et al. 2017; Huse 2007).
Gender Stereotypes in Boards’ Processes
Dysfunctions in board decision-making processes may depend on the existence of gender stereotypes that hinder the effective participation of women in decision-making processes. Although the workforce is increasingly becoming diversified, male attributes, such as competitiveness, dominance, and aggressiveness, are still considered crucial for enhancing managerial career success. Traditional gender stereotypes refer to beliefs that women are less able than their male colleagues for top, executive, and non-executive managerial positions, because they do not have masculine characteristics that are traditionally associated to effective and successful managers (Powell et al. 2002). As a consequence, women are considered as less effective leaders even if they behave in exactly the same manner as men.
Gender stereotypes have a significant impact on the majority group represented by male directors, who tend to consider their female colleagues as less effective in the role of directors, to distrust their judgment and expertise, and marginalize them adopting discriminating behavior, with negative consequences on the board ability to cooperate and combine their contributions in creative and synergistic ways. For example, some scholars argue that individual differences in communication behaviors might determine much of the subtle bias against women. Indeed, women tend to show more socioemotional communication behaviors, compared to men who seem more dominant and assertive (Wood and Karten 1986). Because communication behaviors are presumed to be an indicator of competence, and communication styles of women are perceived as nonstandard and unconventional, the majority group of men tends to underestimate women’s capabilities excluding them from the group’s activities.
The presence of gender stereotypes may produce another dysfunction in board of directors’ processes due to the phenomenon of stereotype threat, which directly involves women’s behavior. The stereotype threat is conceived as the “psychological experience of a person who, while engaged in a particular task, is aware of a stereotype about his or her identity group suggesting that he or she will not perform well” (Roberson and Kulik 2007, p. 26). Individuals who are members of a negative stereotyped group fear to be seen and judged according to a negative stereotype, especially if they are performing a type of tasks regardless of which the stereotype exists, such as women in leadership positions are familiar with the common stereotype that “women are not good leaders.” This awareness creates anxiety and apprehension in individuals exposed to stereotypes with a disruptive effect on their performance, ironically resulting in individual confirming the stereotype he/she wants to disconfirms (Roberson and Kulik 2007).
One of the most interesting issues concerns the application of the stereotype threat theory to explain women’s behavior when they operate as a minority group in a board of directors. Task difficulty, personal task investment, and characteristics of the context are identified in research as relevant variables making workers vulnerable to stereotype threat (Roberson and Kulik 2007). Individuals involved in difficult challenging tasks and feeling personally invested in their job tend to really care about their performance and to experience anxiety and apprehension in their tasks, exposing themselves to stereotype threat. An additional condition needed for stereotype threat to emerge is the context, where some individuals are considered different from others on a salient demographic dimension, race, sex, or age (Kanter 1977).
In this perspective, boards of directors provide a fertile ground for women’s stereotype threat, with relevant consequences on board processes. First, women directors are involved in complex and challenging tasks that require concentration and cognitive resources (Freidson 1988); thus they are likely to experience frustration with task accomplishment. Second, given the prestige of the role, women directors tend to experience a high level of psychological engagement and job identification, believing that doing well in the task domain is important for their self-esteem and identity. Third, despite the women improvements due to the multiplicity of regulatory acts in the last decades, there is still a small minority of women in board of directors, who are labeled as “tokens.” Because of their high visibility, women feel a high pressure in performing, which creates anxiety and apprehension in making tasks, needed conditions for stereotype threat.
The Role of Personal Networks for Accessing to Board Positions
The boards of directors in Italian public companies are composed of executive directors, such as the CEO and large shareholders, and non-executives or outside directors, who generally represent the majority of the board. Non-executive directors cannot have personal ties to the company or to anyone with ties to the company, because of their main tasks to provide protection to stakeholders by guaranteeing objectivity and independence of judgement to control the insiders but also to enhance heterogeneity of point of views and debate among the different members of the board (Corbetta and Minichilli 2006).
Public organizations generally engage in public board director individuals who hold top positions in other large corporations, such as retired CEOs, in order to give clear signals to the community that the top managerial positions are headed by reputable people, specialized in easily attracting and managing resources (Korn and Ferry 2000).
The main improvements for women at board level, following the government acts of the last decades, include non-executive positions, while the proportion of women among executive directors is still very low. Focusing the attention on public sector in Italy, data show that in 2012 women public sector leaders compared to the 64.7% of women across total public sector represent the 27%; also, the 17% of women are in Italian ministerial positions against the 22% of the total of women in parliament (EYGM Report 2013). In the last years, this percentage is growing thanks to the recent reforms about gender discrimination act (the gender quota act), allowing Italy to be ranked in 4th position in terms of total percentage of women across the public sector (27%) and in 7th position among the G20 countries with the 27% index of women as public sector leaders (EYGM Report 2013), but despite this growth of women at top positions in public organizations, their presence is still limited for several reasons, such as the recruitment criteria mainly depending on personal opinions of majority groups.
Indeed, the recruitment of candidates is generally based on personal opinions of the chairman of the board of directors or nominating committee, who tend to select candidates drawing on their personal connections. Thus, people may access to board seats for large and prestigious Italian companies thanks to their informal network connections, while limited network relationships reduce this opportunity, because of restricted information and difficulty in finding a sponsor. Personal recommendation and networking encourage the tendency to select people who are similar to them, mainly represented by male members.
Researchers have emphasized the benefits of informal networks for individuals in the organizational hiring processes, explaining that managers tend to target their recruitment choices on the basis of whom they know personally or who share their loyalties and personal values (Galskiewicz and Shatin 1981). Homophily is the concept used to describe the degree of interaction among individuals who are similar in identity or organizational group affiliations (Marsden 1988). Interpersonal similarities produce common interests and worldviews, which increase easy communication, improve predictability of behavior, and foster relationships of trust and reciprocity (Kanter 1977). This explains the arising of spontaneous ties based on interpersonal attraction (Marsden 1988; McPherson and Smith-Lovin 1987), leading to create or reinforce informal network relationships. Scholars explain that, under conditions of environmental turbulence and organizational uncertainty, individuals are more likely to pursue these networking strategies, which allow assuming more defensive behaviors (Ibarra 1993). In fact, they tend to attract individuals of their informal networks, because trust and loyalty in these relationships ensure reliability under conditions of uncertainty (Kanter 1977).
According to this perspective, the changes following the equal opportunity laws for board of directors tend to distort the traditional power relations creating uncertainty and concern among the members of overrepresented groups, who fear losing their traditional position of power. These concerns tend to favor the recruitment of women directors who are already known and have personal ties with the CEO or the group of shareholders, so to ensure trustful relationships and loyalty and avoid contrasting opinions in board decision-making processes. As a consequence, competences and professional expertise are not a condition for women to be appointed as a director; they often do not offer a real professional expertise that makes difficult for them to guarantee an active participation to a board debate and provide an effective contribution to group’s problems. Moreover, the absence of autonomy from the overrepresented groups creates conformism among board members because women do not bring divergent perspectives from the higher-status men, and this can hinder effective group decision-making processes.
During the last two decades, most studies in the literature focused on diversity tend to underline the difficulties faced by women in ranking very top management levels within organizations, which remain still mainly dominated by men especially in public organizations. Despite the increasing attention paid by scholars to the structural barriers for women to access to very top positions within organizations, still limited studies investigate the reasons and limits faced by women in being members within boards of directors.
Indeed, the female representation in corporate boards within public organizations, specifically local administrations and state-owned companies, is very low, depending on environmental, political, social, and cultural factors related to each country. More specifically this underrepresentation of women in decision-making processes and positions stems from traditional gender roles and stereotypes, the lack of support for women to balance care responsibilities with work, and the prevalent political and corporate cultures (Sheridan 2001; Zona and Zattoni 2007; European Commission 2017). Also, women perceive to be discriminated in public corporate boards, and, consequently, numbers about women in public corporate boards still follow an inverse direction showing an alarming female discrimination.
This study aims to “open the mind” in public organizations, in order to think about and evidence how the group dynamics affect the concrete participation of women to decision-making processes of boards. Indeed, because of the existing gender stereotype threat in board processes, many dysfunctions still characterize the boards’ decision-making processes by hindering the effective participation of women. Being part of gender majority groups plays a crucial role in being actually involved in decision-making processes of boards, because of the impact derived from the personal networks. Male directors tend to create a closed network, where personal interactions tend to support mostly men in accessing to board positions.
This analysis mainly outlines the limitations of gender quotas laws and interventions and, consequently, the need to introduce some initiatives, like diversity training programs, for creating and developing a different way to see women at workplace in top managerial positions, overcoming any gender stereotypes, and, at the same time, for trying to formalize personal connections going beyond the gender discrimination. All the organizations, especially public organizations, receive many benefits in having an increasing cross-gender workforce, especially at top positions in the boards of directors, but they also need to promote training and educating initiatives for both, men and women, at leadership positions for involving women in being “role models,” becoming positive examples for all females at workplace, and, creating, in the future, “successful personal networks” for women by promoting their access to board positions.
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