Friday, 22 May 2015

An argument for diversity

(Devey, 2015, citing ItWasNeverADress, 2015)
Diversity was a hot topic in 2007, but it went dark as the GFC squeezed margins. Now we know we are out of recession: the issue is rising again.

In 2003, Norway quotaed board diversity, setting a requirement of 40% women directors on all listed company boards by 2010. Now Germany too has set a quota requiring 30% of all German non-executive directors to be women by 2016 (Reuters, 2015).

This move has sparked a lot of debate about diversity on boards here in New Zealand. There has been a lot of argument about whether gender diversity adds value or not. Some studies say yes, some say no (Rhee, 2015). With the lack of evidential consensus, those saying gender does not bring value are often accused of being part of the "old-boys network" with the opposition being accused of "social engineering" (IOD LinkedIn Group, 2015).

Rhee (2015) says that "First, diversity provides equal opportunity to groups historically excluded from positions of power and enables full use of the pool of available talent. The second claim is that diversity will improve organizational processes and performance. This business case for diversity tends to dominate debates in part because it appeals to a culture steeped in shareholder value as the metric for corporate decision making. This is also the claim on which controversy centers".

Neither extreme appropriately tackles the issue: determining whether greater board diversity provides better governance. And worse than this, whenever a discussion starts, I feel as though the gender negative research rebuttal is taking a "tobacco lobbyist strategy" approach. Response often feels closed-minded, such as "Board composition is merely a window into what investors believe are the most qualified individuals to manage and be custodians of their wealth. Any other purpose in the appointment process is to distort the reality of the way in which capital markets operate" or "I've found particularly over the last two or three years investors vote for the best person for the position regardless of gender,race or even left or right political persuasions" (IOD LinkedIn Group, 2015).

In my view, there is a clear advantage to having any representative board look like the population it represents: the board then seamlessly keeps pace with societal change, as society itself moves and grows. When representation becomes more out of alignment with the wider group, the potential for disconnect, poor decision-making, lack of market understanding and myopia grows.

If your organisation serves a clientèle that 'looks like' New Zealand as a whole, then you need a board that represents our 51% women, 49% men, 14% Maori, 8% Pasifika, 13% Asian and 65% European population; with 35% under 40, 35% 40-65 and 30% over 65. Now that would be a challenging set of board diversity targets to aim for.

As a woman, a member of the marginalised 'minority', I have personally experienced having fewer opportunities, less clarity of path, less leverage in networking and fewer 'hand ups' than my male peers. I once thought that eventually we would balance out. My personal experience is that pre-feminism barriers and biases still exist. Thus, I have shifted over the years from a "we don't need quotas for equality" point of view to a "we will not overcome senseless prejudice until we quota" point of view.

Pete Hodgkinson, a contributor to the IOD LinkedIn Group (2015), made a very interesting point. He posted "In the late 70s, the top 5 orchestras in the US had fewer than 5% women players. Blind auditions were introduced, whereby players played from behind screens in the early rounds, and now women make up over 30% of players. Note that nothing about the skill levels of the players changed, but the undeniable bias against women in the orchestras was acknowledged and accounted for" (2015).

What if we held blind auditions for boards of directors? Now wouldn't that be interesting!


Sam

References:
  • Devey (2015). 8 Times a Women’s Bathroom Sign Got a Facelift (PHOTOS). Retrieved 21 May 2015 from http://truvisionandvitality.7daytrufit.com/8-times-a-womens-bathroom-sign-got-a-facelift-photos/
  • Rhee, June (2015). Diversity on Corporate Boards: How Much Difference Does “Difference” Make? Retrieved 21 May 2015 from http://corpgov.law.harvard.edu/2015/01/05/diversity-on-corporate-boards-how-much-difference-does-difference-make/
  • IOD LinkedIn Group (2015). Investors interested in board diversity. Retrieved 30 April 2015 from https://www.linkedin.com/groupItem?view=&gid=164708&type=member&item=5996842178498805760&commentID=5999293790991511552&report.success=8ULbKyXO6NDvmoK7o030UNOYGZKrvdhBhypZ_w8EpQrrQI-BBjkmxwkEOwBjLE28YyDIxcyEO7_TA_giuRN#commentID_5999293790991511552
  • Reuters (2015). . Retrieved 21 May 2015 from http://uk.reuters.com/article/2015/03/06/uk-germany-women-quotas-idUKKBN0M214W20150306

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