Lecture 4: Diversity in upper echelons: causes and consequences
van Veen K., & Elbertsen J. (2008). Governance Regimes and Nationality Diversity in Corporate Boards:
A Comparative Study of Germany, the Netherlands and the United Kingdom. Corporate Governance: An
International Review, 16/5, 386-399.
Veltrop, D. B., Hermes, N., Postma, T. J. B. M. and de Haan, J. (2015), A Tale of Two Factions: Why
and When Factional Demographic Faultlines Hurt Board Performance. Corporate Governance: An
International Review, 23: 145–160. doi: 10.1111/corg.12098.DOI: 10.1111/corg.12092
Veltrop, D. B., Molleman, E., Hooghiemstra, R. B. H. & van Ees, H. (2017) Who's the Boss at the Top? A
Micro-Level Analysis of Director Expertise, Status and Conformity Within Boards, Journal of
Management Studies. 54(7), p.1079-1110.
, van Veen K., & Elbertsen J. (2008). Governance Regimes and Nationality Diversity in Corporate Boards: A
Comparative Study of Germany, the Netherlands and the United Kingdom. Corporate Governance: An
International Review
The authors aim to investigate the impact of national governance systems on the level of nationality diversity in
corporate boards and the extent to which nationality diversity is associated with corporate governance practices.
The authors begin by providing an overview of the three governance regimes, which differ in terms of the degree
of shareholder orientation and the extent of legal regulation. They argue that these differences are likely to
influence the level of nationality diversity in corporate boards.
The authors then present their empirical analysis, which is based on a sample of 225 firms from the three
countries. The authors use a variety of measures to capture the level of nationality diversity in corporate boards,
including the percentage of non-national directors, the Herfindahl index, and the entropy index. They also use a
set of governance indicators to capture the extent of shareholder orientation and legal regulation in each country.
The authors find that there are significant differences in the level of nationality diversity in corporate boards across
the three countries. Specifically, they find that the level of nationality diversity is highest in the Netherlands,
followed by the UK and then Germany. The authors suggest that these differences can be attributed to the
different governance regimes in each country.
In particular, the authors find that shareholder orientation and legal regulation are positively associated with the
level of nationality diversity in corporate boards. Specifically, they find that firms in the UK, which has a highly
shareholder-oriented system, have a higher level of nationality diversity in their boards than firms in Germany,
which has a less shareholder-oriented system. They also find that firms in the Netherlands, which has a high level
of legal regulation, have a higher level of nationality diversity in their boards than firms in Germany and the UK.
The authors also find that nationality diversity is positively associated with certain corporate governance practices,
such as board independence and CEO duality. Specifically, they find that firms with a higher level of nationality
diversity are more likely to have independent boards and are less likely to have a combined CEO and chairman
position.
Key points:
The study examines the impact of governance regimes and nationality diversity on corporate boards in
three countries: Germany, the Netherlands, and the United Kingdom.
The authors define governance regimes as the combination of formal and informal rules and practices
that shape corporate behavior in a particular country.
The study finds that governance regimes have a significant impact on the nationality diversity of
corporate boards. For example, the German governance regime is characterized by a strong emphasis
on supervisory boards, which tend to be less diverse than executive boards.
The study also finds that there are significant differences in the level of nationality diversity across the
three countries. The UK has the most diverse boards, followed by the Netherlands and then Germany.
The authors argue that the differences in governance regimes and nationality diversity can be attributed
to historical, cultural, and institutional factors.
The study suggests that increasing nationality diversity on corporate boards may require changes in
governance regimes, as well as interventions by policymakers and regulators.
Takeaways:
Governance regimes play a significant role in shaping the diversity of corporate boards, and
policymakers and regulators may need to consider these factors when developing policies aimed at
increasing diversity.
Historical, cultural, and institutional factors can have a significant impact on corporate governance, and
these factors should be taken into account when considering interventions to increase diversity.
The study highlights the importance of considering the specific characteristics of each country's
governance regime when designing policies aimed at increasing diversity on corporate boards.
Overall, the authors conclude that there is a strong relationship between governance regimes and nationality
diversity in corporate boards. They suggest that this relationship is likely to be driven by the different incentives
and norms that exist in each country. The authors argue that their findings have important implications for
policymakers and practitioners, as they suggest that national governance systems can play a key role in
promoting diversity in corporate boards.
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