Board Diversity in Audit and Finance Committees: A Case Study of Coca-Cola

Abstract

Purpose

Board diversity has been an important topic in corporate governance. Extant literature examines the overall diversity in the boardroom and its impact. However, since important decisions are usually taken by the committees, it is important to also examine diversity in committees. We use the Coca-Cola Company as the case study and examine its diversity in both audit and finance committees. Our goal is to raise the awareness of researchers, board nominating committees, and diverse directors themselves, as to whether diverse directors are placed in the right positions to allow them to contribute their diverse views and experiences.

Methodology/Approach

We conducted a case study of the Coca-Cola Company using its proxy statement in both 2016 and 2018.

Findings

While Coca-Cola’s self-reported board diversity stood at 27% in 2016, and increased to 31% by 2018, the critical audit and finance committees showed a distinct lack of diversity. Focusing on gender diversity for the purposes of this chapter, we investigated two possibilities: (1) that the lack of committee diversity is due to the lack of finance and leadership skills of those board members who were from underrepresented groups, but this possibility does not seem likely, (2) that the presence of a female CFO removed the urgency to place board members from underrepresented groups on the audit and finance committees.

Value

We provide a cautionary perspective on the implementation of diversity policies at the highest levels of an organization. The pursuit of diversity, like other admirable corporate goals, can degenerate into a check-the-box mentality. When this happens, diversity can become viewed as a substitute for real competency rather than a complement to existing competencies.

Practical Implications

It is suggested that boards revise the recruiting and selecting process to include more female candidates, and be sensitive how and where those diverse directors can best contribute their perspectives and experiences.

Citation

Chiu, H., Fischer, D. and Friedman, H. (2019), "Board Diversity in Audit and Finance Committees: A Case Study of Coca-Cola", Diversity within Diversity Management (Advanced Series in Management, Vol. 22), Emerald Publishing Limited, Leeds, pp. 95-113. https://doi.org/10.1108/S1877-636120190000022006