Regular visitors to this site will need no reminding of the five studies we routinely cite, showing that increasing gender diversity in the boardroom (‘GDITB’) leads to declines in corporate financial performance. For new visitors, here’s a link to our latest briefing paper on the matter:
It’s important to emphasise that these five studies are longitudinal – the ‘gold standard’ for such studies in this area. No organisations or individuals have yet refuted or criticised the methodologies or conclusions of any of the studies, nor informed us of even one study backing their confident assertions that GDITB leads to improved corporate financial performance. Their favourite tactic is to misrepresent correlation as causation. Indeed, they’re regularly shameless enough to claim that reports (they usually cite a number from McKinsey, one from Credit Suisse, a number from Catalyst, an American feminist campaigning organisation…) provide ‘evidence’ to show that GDITB leads to enhanced performance. They’re lying.
The reports themselves invariably make it clear that causation can be neither concluded nor even inferred from correlation. How many people (including journalists) or organisations went to the trouble to discover that inconvenient truth, before Campaign for Merit in Business? Not one.
Our earlier post (15 January) referred to the DBIS having recently published a 67-page report titled, ‘DBIS Occasional Paper #4: The Business Case for Equality and Diversity – A review of the academic literature’. Here’s a link to the report:
Despite overwhelming evidence to the contrary, DBIS continue to assert that a strong business case exists for GDITB. In common parlance, they assert that improvements in corporate financial performance can be expected to result from GDITB. They’re lying.
DBIS are very familiar with our arguments, and the ‘five studies’ we cite, so have they managed to mention Campaign for Merit in Business within the 67 pages of the report? No, of course they haven’t. And not one minister has agreed to meet with us, despite a string of requests. Has the report at least cited the five studies? Well, they’ve bowed to the fact that two of the studies (Ahern & Dittmar for the University of Michigan, and Deutsche Bundesbank) have been widely reported in recent times, but they’ve utterly ignored the other three. So much for, ‘A review of the academic literature’. Ha.
Even more dishonestly, DBIS fail to report that the two aforementioned studies are longitudinal studies, and therefore worthy of considerable attention. The studies the DBIS cite as supporting GDITB aren’t longitudinal. They’re worthy of little, if any, attention.
It gets worse. On pages 16/17 of the report we find the following:
One of the few papers testing for a direct link between gender diversity on boards and firm performance is Ahern and Dittmar (2011), who use the Norwegian 2003–2008 policy change as a ‘natural experiment’. The introduction of quotas in this period, which forced firms to have 40 per cent women on their boards, left some pre-quota firms with a longer road to travel than others. In more technical language, the authors use the pre-quota variation in female board membership as an instrument.
The authors found that firms reporting the greatest increase in female board membership reported falling stock-market valuations and deterioration in operating performance. They also identify an increase in younger and less experienced boards. However, this evidence is more a comment on the short-term impacts of a quota policy, than it is on the impacts of increasing gender diversity. Whilst the introduction of quotas presents us with a natural experiment, it also changes the very nature of our question to one of, “what are the impacts of mandated (involuntary), rapid increases in gender diversity?”. Any lack of sufficiently experienced women to fill the top jobs would explain these findings.
This is a common tactic of proponents of GDITB, reframing questions to suit their aims. The question they pose states that increases in gender diversity (in Norway) were ‘rapid’ and ‘involuntary’. But the same is effectively happening in the UK. In the deeply flawed and ideologically-motivated Davies Report (2011) – the work of Lord Davies of Abersoch, a Labour peer appointed by David Cameron in 2010 – FTSE100 companies were threatened with gender quotas if their boards didn’t achieve 25% female representation by 2015 ‘voluntarily’.
The result has been predictable – the ‘rapid’ increase in gender diversity we’d expect. In 2010, before the quotas threat, just 12% of newly-appointed FTSE100 board directors were women. In 2012, the figure was 55%. We can expect FTSE100 companies to be damaged by this influx of inexperienced women – being appointed in preference to experienced men – in the same way that Norwegian companies were. How could it possibly be otherwise?
We come on to the DBIS report’s comments about the Deutsche Bundesbank study:
A recent Deutsche Bundesbank Discussion Paper adopts methods that are better able to identify causal impacts of board composition on corporate risk-taking, without completely changing the nature of the question being asked. The authors find that board changes that increase the representation of women are more closely linked to increased levels of risk-taking. These findings may be explained by those of researchers such as Booth and Nolen (2009, 2009a) who suggest that differential attitudes towards risk-taking are moderated, with, “girls found to be as competitive and risk-taking as boys when surrounded by only girls”.
We have the usual Orwellian double-speak here. ‘These findings may be explained…’ means ‘In our trawl of the academic literature, we came across an explanation which suits our policy direction.’ But let’s engage our brains, and challenge the point being made about gender-related competitiveness. The work by Booth and Nolan refers to the competitiveness of girls ‘…when surrounded by only girls’. What relevance does this point have to the behaviour of mixed-gender boards, as with the German banks which were the focus of the Deutsche Bundesbank study? None. Absolutely none.
I imagine the officials at DBIS who prepared this 67-page report are congratulating themselves on it. In our view they should hang their heads in shame for producing such an appalling piece of taxpayer-funded propaganda.
The DBIS’s assault on the British business sector is accelerating. The FTSE250 will be in the firing line after the FTSE100 have surrendered, and we know from Lord Davies that 25% female representation on boards is merely ‘a major milestone on a longer journey’. Let’s not delude ourselves that the final destination on that journey is anything less than 50%, whatever the damage to the British business sector.
Who has cabinet responsibility for DBIS, and in turn this appalling anti-business initiative? The Liberal Democrat MP, Vince Cable, of course. He’s commonly known as the Anti-Business Secretary. Why on earth did a Conservative prime minister, David Cameron, appoint such a left-wing ideologue to this important position in the first place? And, more to the point, why hasn’t he since fired him?