Decision Making among the Major Countries of the World

Decision Making among the Major Countries of the World

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nIntroduction

nBoard members make important decisions in universities colleges and corporates. The board is responsible of making policies related to the organization. Similarly, they act as accreditors, and corporate leaders. In most cases, boards are composed of prosperous personalities especially from outside the institutions (Drummond, 2012). The diversity of the board plays a critical role in determining how it makes decisions as well as its performance. However, board members from outside the institution are required to understand and respect the organizational culture. Moreover, the board is mandated to make decisions that promote strategic corporate governance (Roseberry & Roos, 2014). In this regard, the board members must have a higher sense of engagement and collaboration with organizational leaders. The success of an institution such as university or college is dependent on efficient collaboration in duties between the executive officer and the board. However, when the relationship between these parties does not reflect the need of the organization, it causes tensions that affect the overall performance (Aras, (Ed.) 2015). Different countries have diverse ways of making decisions in the boardroom. Additionally, these countries have initiated different legislations that guide the composition of board which affect the kind of decisions made. The paper will conduct a comparative study in order to determine how different countries such as USA, Japan, Canada, China and India make decision in the boardroom.

nChina

nAccording to Velkova, (2015), a board that is characterized by gender-balance and diversification is able to make proper decisions related to the institution. Therefore, the board should be composed of both men and women aiming to improve their performance. A board having many women is able to offer a wide range of perspectives in the process of making decisions (Velkova, 2015). Moreover, they are able to provide more skills and experience which contribute to making strategic decision in the institution. Furthermore, Vastag, (2015) argued that women in the board are able to promote the implementation of strategic structures. Women are also beneficial in the board because decisions made reflect the organizational culture leading to positive effects (Vastag, 2015).

nChina has witnessed rapid economic transformation in the last few decades. Therefore, corporate governance has contributed to growth of economy. The country also has the largest population across the world and more than half are women (John, Makhija, & Ferris, (Eds.). 2014). However, the country has not fully embraced gender-based balance in boardrooms. In corporate governance, China does not consider gender equity in the board decision making. Research by Roseberry & Roos, (2014) indicated that in 2013, less than 10 per cent of boards for listed companies in the country were women. Therefore, China misses large-scale benefits in decision making which is likely to be provided by women. Men who do not consider ideas from women hold up most senior managers in the country. The Chinese legislation does not provide a quota system, which can demand inclusion of women in decision of board (Roseberry & Roos, 2014).

nIndia

nIn 2013, India introduced the Companies Act. Under this legislation, the aim was to promoted democracy of corporations, enhance the governance of the board, and strengthen self-regulation. Additionally, it was intended to minimize the time and number of approvals from the governments. The Indian government acknowledges that board diversity will promote effective decision-making process (Vastag, 2015). It promotes accountability and responsibilities of independent directors, managers and executive officers. In order to inspire board diversity, the Company Act requires firms to select more women in their boards in order to facilitate more-inclusive decision-making process. More specifically, the legislation provides appointment of women in at least one position of a director in all Listed and public companies. The firms are allowed a period of one year to comply with the law. For new companies, they are allowed only six months to incorporate the required personalities (Drummond, 2012). Decisions made by the board that does not comply with the law are not legally binding.

nIndia also formulated a regulatory commission known as the Security and Exchange Board (SEBI). The regulatory commission is mandated to ensure that all boards in the country have the required diversity (Leblanc & Gillies, 2010). However, the legislation has excused smaller firms from this regulations especially those with lower capital share of INR 100 million. Research indicates that since introduction of this legislation, decision-making process in boards are led by women because more women have been appointed as directors (Baker & Cracknell, 2013). Consequently, they are able to promote the quality of the decisions unlike when they are done by men. Nonetheless, more need to be done because women appointed in these positions only come from a family hence there are dependent persons (Roseberry & Roos, 2014). Furthermore, only a small percentage of women approximately 7 per cent of women are members of boards in India despite women composing more than 50 per cent in the population (Vastag, 2015). This means that the decisions of the board does not reflect the needs and will of about half of the Indian population.

nJapan

nIn Japan, men dominate decision-making process in the boardroom because few women act as board members. In most cases, Japanese women are not included in policy making in the board. Similarly, women rarely participate in businesses hence they are few women board members. In 2011, a study by Velkova, (2015) noted that Japanese women occupy less than 2 per cent of board members. However, recently, the business and political class have built a consensus to reserve one position for women in the board. In the contemporary financial and business decision-making, women play a crucial role (Velkova, 2015). The major challenge in Japan is to develop strong and bolder avenue of female leaders for both non-executive and executive positions (Aras, (Ed.) 2015). In 2013, the authorities introduced new corporate code, which stipulates that more directors from outside the institution must be included in the boards (Roseberry & Roos, 2014). Similarly, a boardroom session should include at two women in the decision making process.

nThe prime minister of Japan has promised to initiate various policies, which are aimed at women empowerment. Additionally, the policies will enhance higher level of women participation in senior leadership of the board. In this way, women will be able to influence decision-making process (Drummond, 2012). By 2020, Japan aims to have more than 30 per cent of board members to be composed of women. An organization of companies in Japan known as KEIDANREN has encouraged its members to increase women engagement in decision-making processes of the board (Vastag, 2015). In addition, quota systems are expected to increase representation of women in boards. Ultimately, through these initiatives, decision-making processes will incorporate the views and perspectives of women.

nSouth Korea

nIn South Korea, the decision making process in boardroom does not consider the view, ideas and perspectives of women. The majority of board members in companies, universities and colleges are men. In the contemporary Korean corporate governance, women make up less than 2.5 per cent of the boardroom members (Roseberry & Roos, 2014). South Korean women face a huge problem with regard to participating in boardroom decision making. According to John, Makhija & Ferris, (Eds.). (2014), currently, women in South Korea experience a glass ceiling to join the companies’ boardrooms. In addition, very few women are managers of large Korean companies. Therefore, their opinions are not heard when making decisions (John, Makhija & Ferris, (Eds.). 2014).

nSouth Korea is making significant measures to improve women participation in decision-making process. In this respect, more regulatory and voluntary initiatives are being formulated aiming to reduce the challenges facing women (Leblanc & Gillies, 2010). Moreover, South Korea lacks a quota system, which forces companies to include positions for women in boardroom decision-making process (Dhir, 2015). However, the South Korea government intends to enact a legislation, which will force large organizations to reserve certain managerial positions for women. In addition, women will hold at least 30 per cent of executive positions (Vastag, 2015). In 2014, Senator Eun-Hee Kwon introduced a bill in the National Assembly seeking to legislate gender quota systems in boardrooms.

nCanada

nFor firms to make successful decisions in modern international market, it is important that the board members demonstrate diversity in background, ethnicity, nationality and thought. Boards, which meet diversity in management, have a higher chance to improve performance and innovation. In Canada, diversity is encouraged in boardroom decision-making (Roseberry & Roos, 2014). However, many Canadian organizations face the challenge of attaining this requirement. In the past ten years, quota system was introduced in corporate governance to force companies to set aside 50 per cent of executive positions for women in Quebec province. However, the implementation of the law began in 2011 (Velkova, 2015).

nOn the other hand, the Canadian Senate passed the Boards of Directors Modernization Act in 2014. The provisions of this legislation stipulate that 40 per cent of board positions should be held up by either gender. For instance, a board with eight members would be forced to have included directors that does not exceed by two in either gender. The law targeted financial organizations, government business and listed companies (John, Makhija, & Ferris, (Eds.). 2014). Furthermore, according to this regulation no gender is supposed to hold less than 20 per cent.

nThere are a number of proposals, which are also aimed at enhancing transparency in decision-making process in Canadian. The transparency is aimed at helping business people in voting decisions and investments. Baker & Cracknell, (2013) argue that diversity is important in Canadian decision making especially for businesspersons because it facilitates formulation of new insights in the firm’s growth. Therefore, decisions made in boardrooms should demonstrate a shared value, which caters for the interests of either gender (Baker & Cracknell, 2013). In 2009, the Canadian Board Diversity Council (CBDC) was established intended to improve the process of decision making in boardroom through fair diversity (Dhir, 2015).

nThe CBDC releases a report on annual basis indicating boardroom composition in terms of disability, status of aboriginals, ethnicity and gender (Roseberry & Roos, 2014). On the other hand, the government is trying to improve the quality of decision making by launching advisory council involving public and private companies’ leaders (Frisch, 2011). The council has come up with a national goal to realize 30 per cent of board positions to be held by women by 2019. Currently, in Canada women hold up only 17 percent of boardroom positions (Vastag, 2015). The task now is to inspire both private and public companies to achieve balance in terms of gender in their boards.

nUnited States

nIn the United States the decision-making process, express the need for diversity in boardrooms. A board of directors of a listed company makes policies that affect either gender. According to Yardley, Kakabadse & Neal, (2012), women representation in the boardrooms in the US has been low as compared to Europe. In 2013, reports indicated that less than 12 percent of boardroom members are women (Yardley, Kakabadse & Neal, 2012). In this regard, women have a limited chance to make crucial decisions in governance of large companies in the country. The US lacks a quota system, which can fast-track appointment of women in decision-making seats in business. Moreover, since diversity is not guided under the law, most companies in the country choose to include education, race, and background (Vastag, 2015).

nHowever, some states such as California enacted Concurrent Resolution Act, which demand high rate of representations in the board especially for disadvantaged groups such as women. The legislation states that all public companies should set aside at least one seat in the board for women (Dhir, 2015). Similarly, the state of New York, authorities are encouraging investors to include more women in their decision making organs (John, Makhija, & Ferris, (Eds.). 2014). Furthermore, various firms have launched a number of initiatives to encourage participation of women in decision-making process just like men. For instance, the 30% Club is actively involved in campaigning for women representation in the boards with at least 30 per cent of seats reserved for them (Aras, (Ed.) 2015). Moreover, the Alliance for Board Diversity aims at improving the value of shareholder via all-inclusive corporate board hence companies are encouraged to include more minorities and women in decision-making processes (Dhir, 2015).

nRussia

nThere are no legislations in Russia that guide on the corporate governance in the boards. However, women in Russia play a crucial role in decision-making process of the boards. Women serving as board members in Russia are often described as innovative, reliable and professional (John, Makhija, & Ferris, (Eds.). 2014). Nonetheless, the country lacks quota system that would encourage more women to participate in making decisions. Currently, Russia has slightly over 8 per cent of women working in the position of decision-making. Roseberry & Roos, (2014) argues that the process of decision making in the Russian boards can be described as business as usual because they country does not respond to the growing role of women (Roseberry & Roos, 2014). Quotas systems are important in countries such as Russia where there is no will to transform the current system.

nSouth Africa

nSouth African government has drafted a number of legislation aiming to enhance all-inclusive decision making in the country. The country has witnessed progressive transformation in terms of balanced and inclusive decision making in the corporate governance over the past decade (Baker & Cracknell, 2013). For instance, the government has formulated standards for participation and representation in boardrooms. Furthermore, the government is focusing on capacity building aiming to help disadvantaged groups such as women to join decision makers in the boardroom (Vastag, 2015). Different organizations also seek to strengthen the attitudes and understanding of boys and men to help them embrace women participation and capabilities as equal partners in development agenda (Velkova, 2015). Similarly, they are establishing support structures for women intend to realize 50 percent representation in policy and decision making organs in corporate governance. These initiatives will enhance significant women engagement in senior positions that will enhance their capacity as critical decision makers (Aras, (Ed.) 2015).

nThe South African parliament has enacted the Broad-Based Black Economic Empowerment Act, which provides for use of empowerment approaches across the country especially to cover the disadvantaged members of the society such as communities living in rural areas, the disabled, youth and women (Drummond, 2012). The act has recorded significant gains because the number of women representation in boards has increased to 20 percent. The goal of the legislation is to support black women in the management and ownership of new businesses. Secondly, the objectives were to help women access expertise training, infrastructure and economic operations (Roseberry & Roos, 2014). Therefore, in South Africa women are important decision makers in the board since representation in the boardroom has improved in the recent past. However, more need to be done in order to transform the decision making process in the country (Post, 2016).

nEurope

nSince the Rome Treaty was enacted in 1957, the EU has made substantial efforts to strengthen a balanced and inclusive decision making policy. First, EU seeks to promote equity in representation of both women and men in crucial positions of decision-making in boardroom (Post, 2016). For instance, the European Commission initiated its approach for equity between either gender in 2010. The issues of diversity in terms of gender especially on boardroom are given highest priority. Starting from 2011, organizations operating in Europe were asked to introduce self-regulation mechanisms that would bring gender equality in the corporate boards (Vastag, 2015). Nonetheless, these mechanisms were slow in realization of gender equity in boards. In this regard, the EC launched directives to fast-track progress towards all-inclusive decision making in the board across Europe (Roseberry & Roos, 2014).

nThe European Parliament has enacted the directive meaning that the member countries will be required to implement the directive. The features of this directive suggest that companies should have at least 40 per cent of underrepresented gender in their board of directors. A firm that fails to meet this directive can be sanctioned for failure to comply (John, Makhija, & Ferris, (Eds.). 2014). However, appointment of board members should be based on merits but the process should be neutral, and unambiguous.in 2014, the directive recorded positive effects because women representation in big companies rose from 11.9 to 20.2 per cent in 2010 and 2014 respectively. Countries with the largest rate of increase included the United Kingdom, Germany, Belgium, Italy and France. Nevertheless, all the member nations have failed to attain the 40 per cent goal. Currently, only four European countries whose women members in boardroom account for more than 25 per cent (Aras, (Ed.) 2015). They include Sweden, Finland, Latvia and France.

nFurthermore, many European countries have initiated quota systems to help in improvement of decision-making processes in boardroom. For instance, countries like Austria, Denmark and Portugal uses legal mechanism to guide the decision making process (Roseberry & Roos, 2014). On the other hand, nations use legislation of equal access as well as voluntary approaches. The main challenge is to attain equality in all position of decision making between male and females in boardrooms.

nGermany

nIn 2015, German Legislature enacted a law which forces all listed firm to set aside at least 30 per cent of positions of policy making to women starting from 2016. Women in Germany are normally underrepresented in companies although the country has a female president and about 40 percent of women are cabinet ministers. Similarly, it has the largest economy in Europe (Vastag, 2015). Previous voluntary mechanisms have produced limited fruits hence the need for mandatory laws. Organizations that fail to comply with this regulation are supposed to recruit women in other open seats.

nThe Corporate governance code in Germany provided of numerous recommendations aiming to enhance decision-making processes in management and supervisory in boardrooms (John, Makhija, & Ferris, (Eds.). 2014). For instance, the board of management should adopt fair selection process that includes both men and women.

nItaly

nItaly has introduced a number of legislation that determines the decision-making processes in the boards. For instance, quota systems related to gender has been introduced aiming to improve gender diversity in boardroom decision making. Consequently, the number of women serving as directors of board has increased over the past five years. Italy enacted the Gender Balance on the Boards of Listed Companies in 2011 (Roseberry & Roos, 2014). The provisions of this regulation set aside one-fifth of the board of directors’ positions to be held by underrepresented gender. The directive was adopted also in companies and institutions owned by the government. The implementation of this regulation started in 2012 where companies were supposed to change their internal laws to ensure they include all people in the decision making process. Both statutory auditors and elected members are supposed to have not less than one-fifth of the women (Post, 2016). In case the companies fail to meet this threshold in their board, the Italian securities authorities via Consob warn them. Moreover, the company is allocated a maximum period of four months to comply (Velkova, 2015). Noncompliance after this period attracts a fine of not less than 100, 000 euros and not more than 1 million euros. The noncompliant firm is forced to comply within the next three months. Finally, in case a firm that has continuous reports of noncompliance, the board is consider illegal and it would be disbanded (Frisch, 2011). The equal opportunities minister and the Italian prime minister are responsive of ensuring that there is full compliance with the legislation.

nItaly has recorded positive progress towards all-inclusive board of listed firms since the enactment of the law. In 2014, reports indicated that approximately 20 per cent of the seats in listed companies’ boards are held by women as compared to 2011, which was 7 percent (Roseberry & Roos, 2014). This indicates that women are part of decision making in corporate world hence they provide new insights in the companies.

nConclusion

nFurthermore, the board should provide leadership on strategic issues facing the organization. Since boards are the final decision making organ in institutions, it is essential for the members to be partners in the daily running of the firm (Frisch, 2011). In the recent past, board decisions have experienced paradigm shift from just corporate governance to entrepreneurial thinking (Roseberry & Roos, 2014). The number of women in corporate boards has increased in different countries over the past decade. Therefore, it means that women are being recognized for the quality insights and perspectives in the board. However, more needs to be done to encourage equal representation of disadvantaged groups in policymaking level.

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nReferences

nAras, G. (Ed.). (2015). Transforming Governance: New Values, New Systems in the New Business Environment. Gower Publishing, Ltd..

nBaker, C., & Cracknell, R. (2013). Women in Public life, the Professions and the Boardroom. MPs, 2013(23), 23.

nDhir, A. A. (2015). Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity. Cambridge University Press.

nDrummond, H. (2012). Guide to decision making: getting it more right than wrong. John Wiley & Sons.

nFrisch, B. (2011). Who’s in the Room: How Great Leaders Structure and Manage the Teams Around Them. John Wiley & Sons.

nJohn, K., Makhija, A. K., & Ferris, S. P. (Eds.). (2014). Corporate Governance in the US and Global Settings (Vol. 17). Emerald Group Publishing.

nLeblanc, R., & Gillies, J. (2010). Inside the boardroom: How boards really work and the coming revolution in corporate governance. John Wiley & Sons.

nPost, D. (2016). Affirmative Action Matters: Creating Opportunities for Students around the World edited by Laura Dudley Jenkins and Michele S. Moses. Routledge International Studies in Higher Education Series. New York and London: Routledge/Taylor & Francis, 2014. 244 pp. $160 (cloth). ISBN-13: 978-0415508070.

nRoseberry, L., & Roos, J. (2014). Bridging the Gender Gap: Seven Principles for Achieving Gender Balance. OUP Oxford.

nVastag, G. (2015). Research in the Decision Sciences for Global Business: Best Papers from the 2013 Annual Conference. Pearson Education.

nVelkova, I. (2015). Quotas for Women on Corporate Boards: The Call for Change in Europe. Anchor Academic Publishing (aap_verlag).

nYardley, I., Kakabadse, A., & Neal, D. (2012). From Battlefield to Boardroom: Making the Difference Through Values Based Leadership. Palgrave Macmillan.