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Corporate Governance

Key to Corporate Governance is understanding the insights of power; the need of leaders that guide and motivate their followers and the interaction of human beings in the organization; as well as the coordination and control of activities both in private and in professional life.

“There is a lack of talent in top management positions” is often said by prestigious business people, top managers and CEOs as well as executive searchers worldwide. If this is true, the questions are: “Does it also happen inside the Board of directors?”; and “What can be done to improve it?”

Socio-economic Responsibility of the Board of Directors

The social responsibility of the Board of directors is a fashionable issue since the late nineties mainly due to the Enron case and the Sarbanes-Oxley Act in the United States.
Corporations cannot avoid the global scenarios in the future and should be prepared with several contingency plans to avoid spending time and money on trials for not enough having taken into account critical diversity issues today such as age, race or gender discrimination on salary, promotion, consumer preference, emerging diverse technology, new sources of materials, etc….
As President of the European Institute for Managing Diversity, we contest that Corporate Governance is crucial for the sustainability of organizations, today and towards the future.
The mission of the EIMD is to identify the diversity segments within the company,-understand the specific needs that derive from the typology of its human capital-, design programs that tend to contribute to solving social, as well as professional problems of the individuals that make up the organization. Diversity Inclusion Management is the most efficient organisational strategy that institutions must approach in the new highly competitive global scenarios.

Diversity is a global evidence that impacts the socio-economic system. From the point of view of legislation, corporations must address the issue of diversity of risk substantial legal demands, lose of image and shareholder value.

Diversity, key issues for Board of Directors

Diversity in Board of Directors of European multinational companies raises some key questions that are worth being analyzed for the following reasons:

First.-
Because it is a relevant issue in today's business life in the international environment. As Laura d'Andrea Tyson, dean of the London Business School said in Business Week magazine 3/5/04. "corporate scandals and excessive compensation packages for rapacious CEOs have dominated business during the past three years. Profiles of visionary corporate heroes given away to cautionary tales about greedy villains, and public trust in business has plummeted..."

Second.-
Because in 2003 the Tyson Report-one of the most rigorous and prestigious - expressed that "Diversity on Board of Directors has been found to help companies manage key constituencies including shareholders and employees". In 1994 Goodstein, Gautem and Boeker had already assessed that reality.

With today's economic emphasis on knowledge and intangible assets, however, conventional accounting systems actually create dangerous informational distortions." Some of the items included in the intangible benefits of Diversity are improved teamwork, increased organisational commitment and reduced conflict.

In 2003, E. Hubbard firmly answered the question: “Can a perceived intangible asset like Diversity, generate tangible benefits?”, by saying “yes, it can!”
Third.-
Because empirical studies on boards of directors have been trying to answer several questions mainly based on board characteristics such as composition and size; performance and evolution over time. Yet a formal theory on Board of Directors has been formulated, thus leaving a critical void, given the importance of the challenges inherent to governing any organisation.
Given the imperative need for a continuous learning process and anticipating change in Corporate Governance; the Board of Directors should take into account that Diversity Inclusion Management is mainstreaming to decision making at all levels of the organisation in order to achieve sustainable leadership in changing and diverse scenarios

Thesis. Global Succes through Diversity Management in Boards of Directors

Reference and Bibliography