The Role of Language in Corporate Governance: The Case of Board Internationalization

Abstract

Multinational corporations internationalize their corporate boardrooms in order to capitalize on their commercial and financial internationalization. Board internationalization provides access to specialized knowledge and skills, broadens social networks and ensures greater transparency of strategic decision-making. The entry of a foreign board member is often coupled with a change in the working language of the board. The purpose of the present study is to explore and explain how increased language diversity influences decision-making and work processes of corporate boards. We draw on previous research on board internationalization, diversity and language in multinational corporations. Based on a multiple case study of nine multinational corporations from four Nordic countries, we find 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, articulate disagreement and felt socially excluded from the board. Such effects on decision-making and work processes were not found in the well-prepared companies. The study adds to the understanding of different modes to internationalize the board as a response to different forms of internationalization of the firm.

Keywords: language diversity, board internationalization, commercial internationalization, financial internationalization, degree of internationalization, social exclusion, silencing effect

JEL Classification: D22, F23, F66, G34, M16