The final ridiculous report of The Davies Review

It has long been known – from longitudinal studies – that there exists a causal link between increasing the proportion of women on corporate boards, and financial decline. In 2012 we published a briefing paper with links to five longitudinal studies, all demonstrating the causal link.

To the best of my knowledge, there exists no evidence (from longitudinal studies) of a causal link between increasing gender diversity on boards, and enhanced financial performance. C4MB has challenged many individuals and organizations to provide evidence of the causal link they imply – the list of those challenges is here – and no evidence has ever been forthcoming. In plain English:

There is no business case for increasing the proportion of women on boards.

Lord Davies of Abersoch, a Labour peer, was appointed by David Cameron soon after the Conservative / Lib Dem coalition came to power in May 2010. He was charged with making recommendations on how to increase the proportion of women on major corporate boards, and the report following his review – Women on boards – was published in February 2011.

To get a sense of the ideological driver behind the report, we need only look at the Executive Summary on p.3, where the following claim is made:

…gender-diverse boards have a positive impact on performance.(2)

Reference (2) is at the bottom of the same page, but no material is cited. It was clearly taken as a ‘given’ that the statement was true, yet no evidence could be found to substantiate it. In general in this report, as in almost all reports arguing for more women on boards, correlation (between gender diversity on boards, and enhanced financial performance) is presented as evidence of causation, when it doesn’t even imply it.

One recommendation in the Davies report – accepted by the government – was that if FTSE100 companies hadn’t ‘voluntarily’ increased the proportion of female directors on their boards (12.5% in 2011) to 25% by 2015, the government should consider introducing legislated gender quotas, forcing them to do so. The FTSE100 capitulated to this threat without a murmur, and now 26.1% of FTSE100 directors are women. 260 of the current 286 female FTSE100 directors – 91% – are non-executive directors.

The government has just published the final report of the Davies Review, ‘Improving the gender balance of British boards’ – here. With the departure of Lord Davies, a new steering group has yet to be set. The Evening Standard reported the following two days ago:

Cabinet Minister Nicky Morgan today backed a new target to boost the number of women in top company boardrooms after a report revealed slow progress in promoting them into key decision-making jobs.

The equalities minister told the Standard that success increasing the overall number of female directors on FTSE100 boards proved setting voluntary targets ‘concentrates minds’. [No, you silly woman, threatening legislated gender quotas ‘concentrates minds’.]

But with new data showing the vast majority of the female directors are non-executives, Ms Morgan added the focus was now on getting women into powerful executive roles now dominated by men.

She also said ministers would set up a new steering group to continue the equality drive and that ‘kick-ass’ Apprentice star Karren Brady was in a strong position to lead it.

The final Davies report is 60 pages long, and I won’t trouble you with a detailed analysis. It is significant that nowhere in the report is there a claim that increasing female representation on boards leads to enhanced corporate financial performance.

We can be very sure that C4MB has had an influence on the narratives employed in this ideologically-driven report, because we’ve challenged politicians, civil servants, and others over the past four years. In 2012, on behalf of C4MB, I gave evidence to House of Commons and House of Lords inquiries, the video of my House of Commons appearance is here.

On p.7 of the final Davies Review report:

Businesses needs (sic) to continue efforts to increase women’s representation further and more women should now be progressing to Chair and Senior Independent Director appointments, with increasing numbers of women appointed to Executive Director positions.

Exactly why businesses ‘need’ to do that is unclear. The evidence from longitudinal studies clearly proves businesses need to NOT do that. From the recommendations on p.7:

Increased Target, More Chairs and Action from All Listed Companies

Increasing the voluntary target for women’s representation on Boards of FTSE 350 companies, to a minimum of 33% to be achieved in the next five years.

All stakeholders to work together to ensure increasing numbers of women are appointed to the roles of Chair, Senior Independent Director and into Executive Director positions on Boards of FTSE 350 companies.

All FTSE Listed companies now assess the gender balance on their Boards and take prompt action to address any shortfall.

In 2011, 9.5% of FTSE350 board directors were women, today the figure is 21.9%. The demand is for 33% by 2020, and it won’t stop there, we can be very sure. A government adviser is on record as saying that the longer-term target is gender parity on FTSE350 boards. From p.9, a ludicrous pretence that there exists a business case for appointing more women to boards:

Compelling Business Case versus Equalities issue

From the very beginning we addressed the lack of gender diversity on British Boards as a key business issue, at a time when it was still being narrowly boxed by many as an equalities, diversity or women’s issue.

We worked up the business case for change and spoke language business understands. The value-add of diverse perspectives, the economic arguments on talent management and the modernising of British business. We spoke of global credibility, impact to reputation, the longer-term stability of our economy and the UK’s competitive position on the global stage.

The business case is even stronger today as Chairs report on the positive impact women are having at the top table, the changing nature of the discussion, level of challenge and improved all round performance of the Board.

On p.10:

The UK is a leader and role model on the international stage for having made such good progress under an entirely voluntary regime.

The claim of an ‘entirely voluntary regime’ is ridiculous, for reasons I’ve already stated. On p.18:

We anticipated that increasing the number of women Executive Directors would be the longer term challenge, as these are the highest ranking and often highest paid roles in any FTSE company. [my emphasis]

However, going forward we should expect to see more women move into senior most ranks as we are now five years into the journey.

The text I have emphasised perfectly illustrates the mindset of the people behind this report. They cannot admit publicly that the ‘longer term challenge’ results from very few women being well-qualified for FTSE100 executive directorships – compared with the number of well-qualified men – so they have to draw on a conspiracy theory, the ‘glass ceiling’, to explain it. They’re saying men are declining to give women executive directorships as these would confer high rank and high pay.

Appendices B-D (pp. 35-56) consist of ‘Performance Rankings’ for FTSE100, FTSE250, and FTSE350 companies. What ‘performance’ is being ranked, you might reasonably ask? Financial performance? No. Simply the proportion of women on corporate boards, the only performance that matters to the authors of this report.

Appendix F (p. 58,59) is on ‘Key Research and Further Reading’. It contains no references to the studies which show conclusively that driving up female representation on boards leads to financial decline.

And so it is that we say goodbye to Lord Davies of Abersoch, hopefully forever. But not before we post again a link to an award presented to him by the Anti-Feminism League in March 2012, shortly before C4MB was launched. Enjoy.

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