Since the decision made by the Board of Governors are the key determinants for the firm’s future performance, such stakeholders are required to portray key attributes that reflect the indicators essential to the achievement of the goals and objectives of the firm.
According to the study conducted on board characteristics and their contribution to the success of the firm ( Bathula, Board Characteristics and Firm Performance, 2008), the paper concluded that it is essential for the internal structure of the governance to align with the external structure of the governance for the success of the firm.
However, there have been reported cases of scandals in various companies. On a lighter note, there is a need to consider board characteristics that contribute to the firm’s success. Therefore, the paper aims to focus on the importance of the Board’s characteristics, the contribution of such attributes towards the performance of the firm, and finally, to analyze the effectiveness of the Board towards the performance of the firm.
On considering various attributes of the Board of governance, leadership holds a stronger position in any organization in a dynamic environment as it is the overall organ responsible for the activities that influence the firm’s performance. ( Duenas, 2021)
The Board of governance on the top leadership is required to display high-quality attributes, starting from the chairperson who displays a good example as copied by his colleagues across the Board ( Duenas, 2021).
In an organization where members of the Board and the management displays high ethical values, such companies are prone to effective and efficient achievement of the goals and objectives. The Head of the Board of governance and the management are entitled to ensure that there is an oversight of the strategic development of the company; they must ensure effective communication in the firm to enhance collaboration and teamwork in the company, which directly results in the achievement of the company’s success. Furthermore, the organ is authorized to set the tone and therefore take part in the monitoring of the company’s activities.
Furthermore, the Board of governors is entitled to provide solutions to challenges faced by the company ( Bathula, Board Characteristics and Firm Performance, 2008); therefore, leadership is much more important to the firm’s performance and the overall effectiveness of the Board.
Diversification of the Board of governance has outweighed the advantages towards the firms’ performance and the Board’s effectiveness.
Increased awareness through technological advancement has led to the diversification of ideas in the management organ, thus enhancing effective decision-making in the company (Kazan, 2022).
Consequently, the Board of governance has a key role, especially in exercising power in decision-making for efficient and effective achievement of the firm’s objectives. With the current issues in an organization, governance has faced challenges of competing interests of internal and external stakeholders in the firm. Therefore, there is a need to focus on board characteristics and their impact on the company’s performance. Such attributes of the Board that impact performance are; leadership, diversity, and independence. Therefore, the study sheds light on the importance and impact of the board characteristics of leadership, independence, and diversity on the firm’s overall performance.
According to the study on the effects of board characteristics on financial performance (Kizito, 2016), the study found that contributions of board members from different ethnic groups and gender had an impact on the performance of the firm.
It is the role of the Board of directors to undertake crucial responsibilities to ensure the firm’s success ( Adeyemi, 2018). Diversification as an attribute of the Board of governance helps create a conducive working environment, promoting good relationships in the company. The feature promotes the representation of all the groups of individuals in the special meetings of the firm. Diversification of board governance enables the assignment of duties concerning the task to be undertaken effectively.
Finally, it is a requirement that there should be equal participation and representation of both genders in various activities in the company ( Stratman, 2020). The idea of sharing equal opportunity among all groups irrespective of gender, race or culture is evidenced during the board meetings. The culture brings about equal participation in decision-making, thus enhancing the effective and efficient performance of the company. The narrative of gender diversification takes in different thoughts from different groups, thus bringing in new ideas compared to the old version. Therefore, diversification encourages thought competence, promoting innovation ( Stratman, 2020). Even though men are most likely to be involved in the Board of directors and are considered more courageous and bold than women, women are persuasive enough; thus, they contribute to the changes made by management.
Non-executive boards of governance work outside the company in decision-making, supervision of managerial activities, and close monitoring of how the firm’s resources are utilized to enhance the company’s performance and are therefore referred to as independent board directors (Martínez, 2019). Therefore, the board member’s independence comes in when no factors can limit his or her judgment or decision on the firm activities. In most cases, they are considered to perform greater tasks towards the achievement of the objectives of the firm (Martínez, 2019). These directors can perform a supervisory task effectively, thus minimizing misuse of companies’ resources thus minimizing the malpractices that may arise in the company. Considering their objectiveness and independent nature, they are important as their decisions are critical to the firm’s performance. The characteristics of an independent director promote the firm’s performance by effectively monitoring the executive and ensuring the alignment of the management and shareholders.
Therefore, the company’s affairs are generally worked upon without the fear of conflict of interest ( Adeyemi, 2018). Non-executive board members actively provide direct linkages between the other stakeholders, management, and the CEOs at large.
In conclusion, leadership, independence, and gender diversity are important attributes of the Board that influence the company’s success. Upon the achievement of the company’s success, it also helps promote the inclusivity of vulnerable groups, thus encouraging equal opportunities to both genders thus, enhancing stronger teamwork, and giving managers and CEOs a conducive environment for achieving the company’s goals effectively efficiently. Therefore, board characteristics are essential and have an impact on the performance of the firm in general.
References
Adeyemi, B. (2018). THE Importance Of Independent Directors. Lagos.
Bathula, H. (2008). Board Characteristics and Firm Performance: AUT University.
Bathula, H. (n.d.). Board Characteristics and Firm Performance: Evidence from New Zealand.
Bathula, H. (2008). Board Characteristics and Firm Performance: Evidence from New Zealand. Auckland University of Technology.
Couto, T. S. (2016). Does an independent Board of governance affect the firm’s performance? Florida: Florida Atlantic University.
Duenas, C. (2021, March 4Th). Four Characteristics of an Effective Board. Retrieved from Proxonomy blog: https://www.praxonomy.com/blog/4-characteristics-of-an-effective-board/
KIZITO, O. P. (2013). The Effects Of Board CharecteristicsS On The Financial Performance. Nairobi: University Of Nairobi.
Stratman, H. (2020). Gender makes the difference: the moderating role of gender on the relationship between management structure and performance in banking. Emerald Publishing Limited.
Kazan, E. (2022). The Impacts Of Board Characteristics On firm Performance In Germany. Twente: University of Twente.
Martínez, M. C. (2019). Do board characteristics drive firm performance? An international perspective. Salamanca: University of Salamanca).
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