The Business Secretary continues to talk and write utter nonsense on the topic of gender diversity in the boardroom. Only Lord Davies compares with him as a bullying male proponent of the initiative. On 16 July the Evening Standard published an article by Cable which plumbed new depths, ‘City passivity and prejudice is still sidelining women’. I had to reply:
Regular readers of this blog will need no introduction to two of the leading British proponents of ‘improved’ gender diversity in boardrooms, Professor Susan Vinnicombe and Dr Ruth Sealy, respectively Director and Deputy Director of the Cranfield International Centre for Women Leaders (‘CICWL’). Professor Vinnicombe founded CICWL in 1999, and it wouldn’t be an exaggeration to say that these indefatigable ladies are leading lights in their movement globally. Who better, then, to stop the Campaign for Merit in Business in its tracks, by providing evidence for the long-claimed yet elusive causal link between ‘improved’ gender diversity in the boardroom, and enhanced corporate performance? Sadly, they have yet to provide such evidence to us. The reason has just become clear, and it is with particular interest that we have read the minutes of last Monday’s House of Lords sub-committee meeting on ‘Women on Boards’:
Much of the content will come as no surprise to people who follow this topic closely, and we may post a detailed critique of the report in the coming days. It seems to us from the minutes of the committee’s meetings that all 11 peers (three of them Conservatives) are supporters of ‘improved’ gender diversity in boardrooms, and all the witnesses questioned have been likewise. Indeed, many of the latter have been professional proponents of ‘improved’ gender diversity. Not a single dissenting voice has been heard. If this is democracy, I’m an aubergine. I’m reminded of the December 2010 CBI report, ‘Room at the Top’, whose 14 co-signatories included 9 women, along with five men who were already on record as being supporters of ‘improved’ gender diversity on boards.
The most interesting section of the minutes is possibly that between pages 4-7, questions 199-201. For the time being we’d just like to bring to your attention Professor Vinnicombe’s response to a question put by Lord Fearn, which I’ve reproduced below. I’ve indented the key sentences. Our thanks to Professor Vinnicombe for her integrity in making these statements. We can only hope that others (Vince Cable and Lord Davies come to mind) start to display more honesty in this area. But let’s not hold our breath, because they’d be admitting what we have long known – there is no financial case for improving gender diversity in the boardroom. And without a financial case, what is left? Nothing more than left-wing conspiracy theories, fantasies, lies, delusions and myths.
Lord Fearn: Is there a strong business case for improving the gender diversity of boards? If so, does it follow that there is also a strong business case for increased gender diversity on boards across the EU?
Professor Susan Vinnicombe: Yes. We believe that there is a very strong, compelling and comprehensive business case for gender diversity on boards, and it is a case which stands not only in the UK but across the EU and indeed globally. It sits on several broad platforms.
One is talent management. In all the developing countries of the world, 60% of the graduates are now women. We have a tremendous number of women coming in at graduate level to our big corporates. So the fact that we are seeing so few women at the top on our corporate boards is a sheer waste of talent. Talent management would be our first point concerning the business case.
Secondly, if corporates are to serve their markets well, it just makes sense that they need to be able to represent those markets. In many of the markets, women are the consumers, so it makes very good business sense to have women on the corporate boards of those companies.
Thirdly, there has been quite a push in the past – indeed, we ourselves have engaged in such research – to look at the relationship between having women on corporate boards and financial performance. We do not subscribe to this research. We have shared it with chairmen and they do not think that it makes sense. We agree that it does not make sense. You cannot correlate two or three women on a massive corporate board with a return on investment, return on equity, turnover or profits. We have dropped such research in the past five years and I am pleased to say that Catalyst, which claims to have done a ground-breaking study on this in the US, officially dropped this line of argument last September.
However, there are broader, non-financial performance indicators, such as corporate social responsibility, employee involvement, innovation, philanthropy and good communications, which have been seen to be connected to companies that have women on their boards.
Babcock International Group PLC is a FTSE250 company and a global player in engineering-related services. My thanks to Jason for alerting me to the following excerpt from their last (2011) Annual Report:
Board Diversity We recognise the value to the effectiveness of boards and board committees of their being able to draw upon a diverse range of skills, experience and outlook from amongst their members so as to bring a wide range of perspectives to the oversight of company strategy, risk mitigation and management performance. In order to achieve long-term success in a competitive international environment, companies need to draw upon a diverse range of perspectives and competences that are relevant in that environment. .As Babcock grows in size and complexity and increases its activities around the world this is likely to become even more important. Diversity in this respect is very much about the personal approach, qualities and experience of individual directors and not about simply who or what they are. We note the views of Lord Davies in his Review into Women on Boards published earlier this year as to increasing gender diversity on boards and in senior management roles. We recognise that gender, like other attributes and experience, can contribute to the diversity of perspective that we seek and that in selecting for board appointments this is something of which we need to be, and are, conscious. That said, our overriding criterion for appointment must always be merit and the best candidate for the role. We, like others, are sceptical of quotas for the numbers of women (or any other persons based on group characteristics) on boards or in other senior management roles as they do not necessarily deliver the individuals with the best skill set or experience and can lead to tokenism. We note that Lord Davies’ review does not set quotas as such, but encourages companies to state their aspirations as to the numbers of women on their boards and that his report (and others) recommend specific targets to be aspired to by certain dates. We understand the good intent and motivation behind this, but believe that stated aspirations as to targets of this kind can easily become self-imposed quotas. They also inadequately allow for the fact that companies in different sectors have different challenges in this respect. The traditional engineering sector in which Babcock primarily operates is inevitably going to find that it is more challenging and will take longer to find women candidates with the right experience and background to move into senior management roles and board positions than those operating in some other sectors.