The Silent Board: How Language Diversity May Influence the Work Processes of Corporate Boards

• Author: Lars Oxelheim,Trond Randøy,Rebecca Piekkari
• Date: 01 January 2015
• DOI: http://doi.org/10.1111/corg.12085
• Published date: 01 January 2015

The Silent Board: How Language Diversity May

Influence the Work Processes of

Corporate Boards

Rebecca Piekkari*, Lars Oxelheim, and Trond Randøy

ABSTRACT

Manuscript Type: Empirical.

Research Question/Issue: Corporate boards often change their working language when they acquire foreign members.

Consequently, boards “talk”in one language but “think” in another. The present study explores and explains how language

diversity influences work processes of corporate boards.

Research Findings/Insights: On the basis of a multiple case study of nine multinational corporations (MNCs) from four

Nordic countries, we discovered evidence of impoverished and silenced discussions in board meetings in those case

companies that were unprepared to switch to English as the new working language of the board. Some board members

found it difficult to contribute to board meetings and articulate disagreement. In contrast, such effects were not revealed in

the well-prepared companies. Overall, the presence of employee representatives on the boards made it more difficult to

conduct work processes in English because these members often lacked sufficient language proficiency. Thus, our findings

suggest that the board co-determination act of the Nordic corporate governance model may be associated with the hidden

costs of using a non-native language.

Theoretical/Academic Implications: Our study makes four contributions to research on board diversity. Firstly, it

highlights the “silencing effect” of language diversity on board processes. Secondly, it emphasizes the linkage

between language diversity and board processes. Thirdly, it provides additional evidence that language is a distinct

dimension of diversity. Fourthly, it discovers language in board work as a new research topic that is worthy of scholarly

attention.

Practitioner/Policy Implications: Firms need to anticipate the potential effects of language diversity on the work pro-

cesses of their boards in order to ensure that “the voice of diversity” is heard. The board itself as well as the rest

of the organization can take preparatory measures such as producing all board material in the new working language

and selecting board members with the required language proficiency. Although these measures can be implemented

gradually or at a faster pace, they need to be in place before foreign members join the board. Consistent use of one

and the same language in the corporate board and the executive management team supports transparency and good

corporate governance practices. In our opinion, reaping the benefits of board diversity is the particular responsibility of

the chairperson. Even though English is generally well understood in the Nordic countries, chairpersons should also

consider the possible negative effects associated with the use of a board language that is non-native to most of its

members.

Keywords: Corporate Governance, Corporate boards; Language Diversity; Work processes; Nordic countries

INTRODUCTION

Percy Barnevik, the former long-time CEO of the Swiss-

Swedish firm ABB and one of the most influential and

well-known business leaders in Europe, has noted that atthe

*Address for correspondence: Rebecca Piekkari, Department of ManagementStudies,

School of Business,Aalto University (formerly Helsinki School of Economics), P.O.Box

21210, FI-00076 Aalto,Finland. Tel: +358 50 38 37 380; E-mail: rebecca.piekkari@aalto.fi

25

Corporate Governance: An International Review, 2015, 23(1): 25–41

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12085

turn of the millennium “some Swedish multinationals still

had only Swedes on their corporate boards despite reaching

figures of 95 percent foreign sales and 80–90 percent foreign

production” (Barnevik, 2011: 331). To Barnevik this did not

make sense. In his biography Barnevik highlights the need

to change the board’s working language from Swedish to

English in order to attract the best brains from abroad.

Barnevik’s experiences suggest that the language used in

board meetings is critical because it determines whose per-

spectives are included in work processes and decision

making. In the present study, we provide theoretical and

empirical understanding on how language diversity influ-

ences work processes in boards; an aspect of board diversity

that has been ignored in past research. We base language

diversity in corporate boards on the number of mother

tongues of the board members and their degree of fluency in

the working language of the board. In this way, we attempt to

capture situations in which corporate boards “talk” in one

language but “think” in another (Brannen, Piekkari, &

Tietze, 2014).

Barnevik’s concerns appear to be motivated by the poten-

tial advantages of having foreigners in corporate boards, as

these directors may be more competent at assessing firm

performance and prospects in foreign markets than home

country nationals.Foreign board members may contribute to

board work by networking with global suppliers, accessing

non-domestic buyers and providers of finance, or by ensur-

ing that the transparency of strategic decisions and the

accountability of the firm’s actions go beyond the national

context, thereby securing international legitimacy and

resource access (Luo, 2005). Foreign board members are

expected to expand the set of specialized skills available to

the board and introduce multiple viewpoints which stem

from variousdimensions of diversity such as culture, nation-

ality, ethnicity, and mother tongue.

Past research on board internationalization has mostly

focused on who these foreign members are and where they

come from (e.g., Oxelheim, Gregoricˇ, Randøy, & Thomsen,

2013) rather than on what they do (Forbes & Milliken, 1999;

Pettigrew, 1992). Observing the mere presence of foreign

board members, however, provideslimited insight into how

they influence the work processes of boards, which is the

focus of this study. By answering the question of how lan-

guage diversity influences the work processes of boards, our

study makes four contributions to research on board diver-

sity.Firstly, our qualitative case study allowed us to discover

what we call “the silencing effect” of language diversity on

the board’s work processes. As such, this study joins the

small but growing body of qualitative research on corporate

governance issues (e.g., Bansal, 2013; McNulty, Zattoni, &

Douglas, 2013). While previous research provides some evi-

dence of this negative effect, it has focused on organiza-

tional levels well below the board (Lauring & Tange, 2010;

SanAntonio, 1987; Schweiger, Atamer, & Calori, 2003). We

were surprised to identify “the silencing effect” at the board

level because it may carry serious performance implications

not only for the board itself, but for the entire company. The

“silencing effect” also runs the risk of undermining the

board’s function as a negotiation forum that reconciles

potentially conflicting interests of represented shareholders,

builds consensus, and sets common goals for directing

managerial action (Ravasi & Zattoni, 2006). Secondly, we

place the work processes of the board at the center of atten-

tion, as the existing diversity literature has primarily been

concerned with the diversity–performance link rather than

the intervening processes (van Dijk, van Engen, & van

Knippenberg, 2012; van Knippenberg & Schippers, 2007).

Thirdly, we provide supportive evidence that language is a

distinct dimension of diversity alongside culture and nation-

ality (see Stahl, Maznevski, Voigt, & Jonsen, 2010 for a meta-

analysis; Tenzer, Pudelko, & Harzing, 2014). Fourthly, we

identify the role of languages in board work as a new topic

for future research.

In what follows, we first review past research to gain

insight into the role of communication and language in the

work processes of the board. Thereafter, we provide the

reader with an overview of the Nordic region as a research

context and explain our case-based research strategy. The

effect of language diversity on the work processes of the

board is then contrasted and compared between the well-

prepared, the unprepared, and the outlier cases. We visual-

ize our key findings in a theoretical model and position

them in the extant literature. In the conclusion we argue why

the topic is both timely and important and acknowledge the

limitations of our study.

LITERATURE REVIEW

Corporate boardsin publicly traded firms are relatively large

and interdependent decision-making groups, which typi-

cally face complex tasks. Compared to other work groups,

boards have a high level of decision-making power, meet

relatively infrequently (4–10 times per year with limited

working hours) and commonly represent divergent interests

(various owners, employee representatives, etc.). Stahl et al.

(2010: 693), who conducted a meta-analysis of cross-cultural

teams, argue that individuals should have “at least a

minimum of a shared language around which to align.”

Board work also requires a high degree of specialized

knowledge and skills, which foreign members can poten-

tially bring to the board (Luo, 2005). However, the mere

presence of valuable expertise does not ensure that it will be

used by the board, particularly if it is hidden behind a lan-

guage barrier. Forbes and Milliken (1999: 499) maintain that

because board members meet only periodically, “they are

unlikely to have time to fully resolve the attitudinal and

linguistic differences that divide them.” They do not elabo-

rate on what they mean by “linguistic differences,” but

argue that boards are particularly vulnerable to “interaction

difficulties that prevent groups from achieving their full

potential” (Forbes & Milliken, 1999: 492).

Not only is extensive communication necessary for inte-

grating the knowledge and skills of individual board

members in creative and synergistic ways and for applying

them to the board’s tasks, it is also essential for conflict

resolution (Stahl et al., 2010). Forbes and Milliken (1999)

identify cognitive conflicts as a beneficial key process in

board work because they contribute to the quality of deci-

sion making in uncertain environments. Multiple view-

points and alternativesolutions are more carefully evaluated

and considered when both positive and negative views are

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