The Influence of Board Diversity and Board Conflict on Performance in Consumer Cooperatives in South Korea

Abstract

Board of directors are important elements in the structure and management of cooperatives. This study examines the relationships between cooperative board diversity (i.e., value and functional) and three performance variables (social performance, operational performance, and democratic performance). Additionally, we hypothesize that conflict (task or relational) mediates these relationships. We argue that decision making, policy, and performance depend on the composition of a board. The empirical analysis, using a sample of 423 female board members in 66 local consumer cooperatives in South Korea, finds that board value diversity can have a negative effect on performance, even though their functional background diversity may be positive, while conflicts over performing tasks may mediate functional background diversity and performance. More specifically, the results indicate that board value diversity is positive and significantly related to relational conflicts, while functional background diversity is negative and significantly related to task conflicts. The findings suggest that performance of cooperatives can be improved with more diverse board with functional backgrounds. We hope that this paper could offer a significant contribution to both the board and corporate governance literature and the diversity literature.