Corporate social responsibility strategy threatens entrepreneurship and innovation

The Institute of Economic Affairs has just posted an excellent article by Michael Klein relating to the latest Corporate Social Responsibility (‘CSR’) strategy of the European Commission, and how CSR is used to force the Commission’s left-wing ideologies upon the business sector, with damaging results. The article:


The endless search for the missing link continues…

I reported in a recent post about an article published recently by The Commentator, ‘Socialism’s Trojan Horse: “improved” gender diversity in the boardroom’:

I’m pleased to report the article has been well received, and the comments well-considered and interesting. In the course of replying to one person’s comments I invited her to provide me with evidence of the oft-claimed positive causal link between ‘improved’ gender diversity in the boardroom and enhanced corporate performance, which remains a ‘missing link’. Another lady replied to my request for evidence and cited two studies, one about American firms, the other about Danish firms. The reports are very technical in parts so I invited Michael Klein, the renowned commentator on the content of research papers, to review them. He kindly agreed to do so, and the remainder of this post is his commentary. My thanks to Michael for this.


‘The diversity of corporate board committees and financial performance’ (Carter et al.)

There are some oddities in table 3 which aren’t addressed in the text, so far as I can tell. Though Table 3 shows that the share of women on boards had a positive effect on performance (Tobin’s q) it doesn’t show an effect of Tobin’s q on share of women in boards, which one could interpret as evidence against the assumption that it is mostly well-performing firms which add women to their boards. However, the oddity is the variable ‘Additional directorships’ which shows in Equation 1 a coefficient of -.242 and in Equation 2 a coefficient of 1.387. This means that holding more than one directorship had a moderate and negative effect on firm performance, but it had a strong and positive effect on the share of women on boards.

I would interpret this result as indicating that the authors had a great number of women in their dataset who held not one but several directorships. Hence, they didn’t measure the effect of diversity, because to measure diversity you’d need different women, but of sameness, because the same women who held several directorships were measured time and time again… Given that boards include 11.4% women, I would consider this one a result-wrecker.

Furthermore, total assets made a negative contribution to Tobin’s q, but a positive one to women’s share in boardrooms, hence, it was asset wealth which explained board composition to a larger degree than financial performance and it was firms with lower assets which explained higher profits to a greater degree than women’s share on boards (equation 1). And, last but not least, it wasn’t women’s share on boards which had a positive effect in Tobin’s q (financial performance), but women’s share on boards of firms in service industries (Variable D8, Table 3), and particularly not on boards in mining industries (D2) and retail (D7). Again, the authors read more into their results than there is to be found, and again I would think that the conclusion they draw isn’t backed up by data. I’m not surprised that this paper didn’t mature into a contribution to a scientific journal. I guess it would have had a number of problems getting over the peer-review-hurdle….


‘Do Women in top management affect firm performance? A panel study of 2,500 Danish Firms’ (Smith et al.)

Overall assessment: It’s awful!

(1) the 2,500 firms examined in the paper included 46 with a female CEO in 1993 and 99 in 2001.

(2) the authors label their variables (e.g. in Table III) consistently Board Top CEOs 1993-2001 implying panel data, but they have only a follow-up with two time points, hardly what the label ‘panel’ would lead us to expect.

(3) Again Table III shows a correlation-coefficient of 0.063 (5% significance level) between having a female CEO and gross profits. That is rather minuscule and given that only 46/99 firms had a female CEO I wouldn’t be surprised if this is a statistical artefact. I can, however, say nothing about it, because information about the quality of the model, usually included in tables (and as a matter of scientific rigour required) is not provided.

(4) Table VII displays coefficients of an Ordinary Least Square Regression (‘OLSR’) – as does Table III – and shows higher education of CEO to be highly correlated with Gross profit, beta= .283. Now, why have the authors not included higher education in Table III, as a control? Guess why? Because the effect between female CEO and Gross profit would vanish into thin air, leaving only higher education. I will eat my Tottenham Hotspur cap if this is not what happens when you calculate an OLSR with female CEO and higher education both independent variables to explain gross profit.

(5) By the way, gross profit is hardly a good measure of financial performance, it depends on too many exogenous variables beyond the control of CEOs. At least, it would have been necessary to adjust gross profits to industry means… Anyway, this study proves that education matters, it doesn’t prove that female CEOs or female share in boardrooms have a positive effect on firm performance.

(6) Just to repeat myself: Why is it that female composition is expected to influence financial performance? What is the theory behind the claim? Ask Smith, Smith and Vernier and you will draw a complete blank.

Wikipedia hijacked by ideologues

I’ve long been a big fan of Wikipedia, and refer to it almost every day. So I was interested to learn that Michael Klein and a German journalist, Arne Hoffmann, have co-authored an open letter about German Wikipedia to the founder of Wikipedia, Jimmy Wales:

They invite people who support the letter to write to them at, and I’ve just submitted the following:

Michael, thank you for raising this important issue, and I look forward to seeing how Wikipedia respond. I would add that the same problem is apparent at times in the English language version. For example, the Wikipedia entry on ‘antifeminism’ has the following statement under ‘Definitions’:

 Michael Kimmel, a men’s studies scholar, defines antifeminism as “the opposition to women’s equality.” He says that antifeminists oppose “women’s entry into the public sphere, the reorganization of the private sphere, women’s control of their bodies, and women’s rights generally.” This, he says, is justified by antifeminists through “recourse to religious and cultural norms, and sometimes … in the name of ‘saving’ masculinity from pollution and invasion.” He argues that antifeminists consider the “traditional gender division of labor as natural and inevitable, perhaps also divinely sanctioned.”

Kimmel’s definitions of anti-feminism aren’t held by any anti-feminists of my acquaintance, and I believe they misrepresent the positions of the majority of anti-feminist activists and writers. We don’t oppose women’s equality. We oppose the relentless special treatment of women and girls in general, and feminists in particular, which is proving highly damaging in many ways, gravely affecting the family, marriage, government, business, media, academia, and much more besides.

Different positions on quotas: The Fawcett Society v The 30% club

I refer you again to the recent submissions of written evidence to the House of Lords sub-committee:

120726 House of Lords sub-committee, written evidence submitted

If you consider all the submissions, you’ll see that virtually all fall cleanly into one of three camps with respect to quotas designed to ‘improve’ gender balance in the boardroom:


This is the position of Campaign for Merit in Business, because it seems to us that such quotas are unmeritocratic, their ideological foundation being left-wing and by definition counter to the legitimate interests of private business, and therefore discouraging wealth creation. Our submission is on pp 47-49, while other contributions in a similar vein are put by Michael Klein (pp 106-111) and Raymond Russell (p 155).


This is (predictably) the position of The Fawcett Society as well as others. The Fawcett Society has frequently been exposed as being cavalier in its use and manipulation of data in business-related areas, for example in its statements on the ‘gender pay gap’. We shouldn’t be too surprised then by their inferring causation from the McKinsey and Catalyst studies and reports, when all they show is correlation (if even that). Anyone familiar with The Fawcett Society will be only too aware it’s a misandrous organisation dedicated to relentlessly advantaging women and girls in general (and militant feminists in particular) at the expense of men and boys, so the nonsense they’ve submitted to the House of Lords committee (pp 67-73) is at least consistent with their ideology.


This position is adopted by the 30% club among others to encourage companies to add more women to their boards ‘voluntarily’. It’s the government’s official position, stated regularly by both the prime minister and Vince Cable, the business secretary. In our view, this position is utterly indefensible. If quotas are wrong, how can the threat of them be right? It’s the same position taken by the mugger who, when addressing his victim, says, ‘I’m against physical violence, but I’m prepared to use it if you don’t hand over your money voluntarily’.

The submission of the 30% club (pp 173-8) has some figures for the proportion of newly appointed non-executive directors who are female:

2010: 13%

2011: 30%

2012 (March to date): 44%

Could it be any clearer? FTSE100 companies are taking on token women in the least risky manner possible – as non-executive directors – in direct response to the threat of quotas. Organisations including the 30% club applaud the increase in numbers, and infer these women are being appointed on the grounds of merit, when most of them are clearly not.

With the London Olympics officially starting today, let me offer a sporting analogy. Let’s include women in the 100 metre men’s event, but with a 25 metre start over the male sprinters, accepted by the men on the grounds that otherwise they’d have 3 seconds added to their times. Would that be a triumph for female athletes? No. And nor is the increase in the number of female directors under the threat of quotas.

Finally, permit me to make a prediction. The business sector will start fighting back against this ideologically-inspired initiative, and soon.

Have a good weekend.

House of Lords select committe inquiry on ‘Women on Boards’: written evidence submitted

Regular visitors to this blog will be aware of the House of Lords inquiry. Herewith the latest update:—internal-market-sub-committee-b/

Written submissions to the enquiry were published this afternoon:

120726 House of Lords sub-committee, written evidence submitted

Most of the written evidence is from the usual suspects, many of them professionally committed to ‘improving’ gender balance in the boardroom. Many of them refer to now discredited reports and ‘evidence’, and overall we have an example of ‘groupthink’ that takes some beating. Which is ironic, given that one of the arguments for more women on boards is to reduce groupthink… We’ve been in touch with most of these groups, and none has offered a shred of evidence of a positive causal relationship between more women on boards and enhanced corporate performance. Indeed, organisations and individuals with some integrity are publicly distancing themselves from the ridiculous claim.

There are submissions, however, offering a different perspective:

Campaign for Merit in Business: pages 47-49

Michael Klein: pages 106-111

Ray Russell: page 155

Michael Klein’s response to the House of Lords ‘Call for Evidence’

My thanks to Michael Klein for agreeing to make available his response to the House of Lords ‘Call for Evidence’. I shall make my own response available next Tuesday, along with details of next Monday’s meeting of the HoL Sub-Committee, and in particular what was said by Susan Vinnicombe and Ruth Sealy of the Cranfield International Centre for Women Leaders.

The link to Michel Klein’s submission:

120713 Michael Klein’s response to the House of Lords ‘Call for Evidence’

The Dictatorship of EU Political Commissioners: State communism, here we come

I’ve already posted on this blog a few articles penned by Michael Klein, who runs the excellent German-language blog With his kind permission, I’m very happy to post another (link below). It describes the deeply entrenched left-wing thinking at the heart of the EU, much of which is hostile to business, ‘improved’ gender diversity in the boardroom (and elsewhere) being one manifestation. The EU Commissioner Viviane Reding, about whom Michael has written before (see earlier post), is acting in accordance with that left-wing bias.

The article:

120708 Dictatorship of EU Political Commissioners

The word is getting out… (updated 9.7.12)

[Note: Michael Klein of posted a comment to the blog which is the subject of this post on 5 July, and as of today – 9 July – it’s still not visible on the blog. I don’t know the reason for this , but for the sake of this blog’s readers I’ve just added Michael’s comment to this blog, at the bottom of the piece.]

My thanks to a supporter for pointing me to an intriguing post on a blog run by Henkel, a multinational company which manufactures such leading ‘personal care’ brands as Persil washing powder, Schwarzkopf haircare products and Loctite adhesives. Enjoy it while it’s still available, because from past history we can expect the ‘improved gender diversity’ brigade to bully and shame the people who run the website into removing the post. In the meantime I invite you to add your own comments to mine.

In case it IS taken down, here’s the text. The first link is to my blog piece for The Institute of Economic Affairs:

The benefit from gender diversity – just a delusion?

(c) Mike Buchanan

The call for more diverse board members and leadership-teams is on everyone’s lips. It is said that companies are able to perform better, be more innovative and will outperform their peers if they increase their diversity. These arguments – at least the gender diversity aspects –are massively challenged by Mike Buchanan, author of the book “The Glass Ceiling Delusion: The real reasons more women don’t reach senior positions”

Mike Buchanan looked at some studies and surveys and found out, that they were not able to find causal links between the higher proportion of women on management committees and a better performance of these companies. Furthermore he found studies which detected deterioration in performance when a women’s quota is targeted and another study that stated that younger executive teams as well as a higher proportion of female executives lead to higher risk taking. Thus the message of Mike Buchanan is clear: The proclaimed benefit of gender diversity is a delusion!

Is he right? If we consider the arguments in more detail theses statements are not as profound as it seems at the first moment but a very one-sided and reduce view of the cited studies. For example one study he quoted proved that companies with a higher proportion of women on their management committees are the ones with the best performance. The poorer corporate performance again could also be due to the inexperience of the younger board members and not attributable solely to the sex. Anyhow – are there facts and figures, studies or surveys which show a significant and causal link, that companies with men in the top management steadily make more profit, perform better or generate more revenues than companies with mixed leadership teams?

With these arguments of delusion in mind another call is even more interesting. Also recent research of McKinsey shows, that companies with diverse executive boards enjoy significant higher earnings and returns on equity. As here only gender and international differences are considered Dr. Gregersen, Professor of Leadership at the Business School INSEAD, even goes further and recommends diversifying diversity.  He believes that even better results can be made – especially concerning the innovation capacity – when not only (or mostly) gender and culture are focused but every kind of diversity is promoted. As in today’s fast moving environment the management teams of companies need to generate innovative or even disruptive strategies, different perspectives, various experiences and open communication which reflects different opinion is needed.

Delusion or a further need to diversify – what do you think?

I’ve posted the following comment:

I’ve just looked at the McKinsey report you mention, and (as expected) it’s as flawed as all the others presented as showing the financial performance benefits of greater gender diversity. From the report:

“We acknowledge that these findings, though consistent, aren’t proof of a direct relationship between diversity and financial success. At high-performing companies, the board or CEO may simply have greater latitude to pursue diversity initiatives, and other management innovations may contribute more directly to superior results.”

We are being led to confuse correlation with causation. It’s like concluding that because rich men often marry beautiful women, those women CAUSE those men to become rich. No wonder beautiful women are in such demand…

I’ve been looking for evidence of a positive causal link between ‘improved’ gender diversity and superior corporate financial performance for three years, and I have yet to find any. The only evidence I can find is a negative link (see my IEA blog). Maybe your readers can provide evidence to me? Thank you.

Mike Buchanan


Michael Klein’s comment:

 I sometimes wonder how long it will take for people looking at a tree to calling the tree a tree. The effect of Gender Diversity in the boardroom is like a tree – It is proven to harm companies not to do companies any good. So we may well skill all this ideological junk and revert to the facts, calling a tree a tree that is.

The proof of quota’s harm is here:
Now lets turn to the McKinsey Study: Freshmen at a university learn that there is a difference between correlation and causation. When you find a correlation between diversity in the boardroom and say ROI, that does not mean Gender diversity CAUSED a good ROI. To claim that is does is called a fallacy of affirming the consequence, it is this very fallacy because one can quite easily argue that it is especially successful companies (with a good ROI) who give in to CSR-pressure exerted by the UN, EU, their national government and include more women in their boards. Hence, there is no need to look any further in this dubious study by McKinsey, but if you do, you will find a sophisticated attempt to avoid the very question of causation.
The next study, usually mentioned when it comes to the supposed merits of Gender Diversity in the Boardroom is a study by the Finnish EVA. I’ve linked and discussed the study here:
When you read this brief “study” carefully, you will not only find a number of methodological errors, but also come to the conclusion that the only argument the authors have left in their arsenal for advancing women’s share in Boards is that they are women, which boils down to the rather crude statement that it is better to include more women in boardrooms, because it is better to include women in boardrooms. In formal Logic we call that a tautology and subsume it under the “no-content” statements.
So as far as science, and not ideology is concerned, there is no way around the fact that a women quota in boardrooms harms a company and does it no good. How could it be different? Anyone heard of something like experience. If the logic behind the women quota would be correct, you could place a newborn child in a boardroom and it would have a positive effect because of the increase in diversity. Hence, I strongly suggest to read Mike Buchanan’s book with an open mind. It will open eyes and avenues of thinking.

Faking Public Opinion: how Viviane Reding abuses opinion polls for her own purpose

While the leading British culprit pushing for ‘improved’ gender diversity in company boardrooms is David Cameron – with his continuing threat of quotas – in the EU it’s Viviane Reding, a Commissioner. I am therefore grateful to Michael Klein of the German language blog for translating his article into English:

How EU Commissioner Viviane Reding abuses opinion polls