By Dr Edwin Nharirire

Imagine a Board of Directors of one of the largest listed companies in Zimbabwe, by market capitalization, boasting of the following among its board members: a creative musician like Tuku, a serial entrepreneur like John, a Farmer Jangano of old, a recent MBA graduate in her late 20s, a human resources practitioner in his 40s and a Priest in his 70s. Such a scenario may never see the light of day in Zimbabwe. One of the key debates in management research on corporate governance is about board diversity and its implications on various indicators of board effectiveness. The key question is how Boards can use board diversity to their advantage.

Board Diversity Dimensions

Board diversity entails heterogeneity in the boardroom along the dimensions of gender, race, age, profession and, in some cases, among, many other dimensions. Boards often differ in their emphasis of board diversity dimensions they should strategically consider. Some companies have superficial diversity not underpinned by any strategy. In Zimbabwe, diversity along professional lines is often respected owing to compliance and governance dictates. Lawyers and accountants are the biggest beneficiaries of this requirement. However, other areas of diversity like gender, race and age suffer greatly.

What Critics say Against Board Diversity

Critics of board diversity have argued that more diverse opinions result in more critical evaluations in decision-making to a point of paralysis of analysis. There is a concern that diversity stifles decision – making which is a disadvantage in a highly competitive environment. Thus, there is a fear that heterogeneity in a board would mean more time to reach consensus and convergence on issues given the different backgrounds. Many still fear that diversity in the board may corrode social cohesion and may result in marked emotional conflicts. In all these seemingly genuine concerns and fears, the benefits of diversity are often lost.

What Critics Miss about Diversity in the Board

In their fears about board diversity, critics fail to note the positive correlation between board diversity and company performance. In well researched pieces, Boards with diverse boards tend to perform better, to respect corporate governance ethos, are more ethical and more innovative than their counterparts. As such, investors look positively on companies with diverse board members especially along gender, profession, race and age lines. Such companies tend to get more inquiries from investors than their counterparts irrespective of the fundamentals. This does not, in any way, suggest that fundamentals will be ignored. It only means that they get shortlisted for investment due to the positive impression created by Board diversity.

Key Benefits of Board Diversity

The following are amongst the key benefits of Board diversity:

• There is a high chance of making objective board decisions if the board is heterogenous, given the risk of overlooking subtle implications of certain decisions in homogenous boards through groupthink.
• There is also a better appreciation of the environment from a diverse board as they are coming from different vantage points. Such intelligence helps the Board to navigate difficult terrains.
• Increased innovation and creativity as diversity is the breeding ground for creative ideas.
• Increased social capital for the company, stemming from diverse networks of the board members.
• Enhanced company brand, especially if the company’s image is associated with consumer behavior.
• Enhanced financial performance of the company stemming from diverse contribution of board members.

So, depending on gaps, a company can employ a young, female and black lawyer to address many diversity issues at once.

Board Diversity – The Way to Go

Boards should start seriously looking at diversifying their boards along what is strategically important to them. The Public Entities Corporate Governance Act, 2018, provides that, as far as is practical, public entities Boards must-

• Have equal numbers of men and women;
• Ensure that all Regions in Zimbabwe are fairly represented; and
• Ensure that there is diversity of skills, experience or qualifications.