Peter Crow
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The case for diversity in boardrooms

25/7/2014

 
Over the past few years, I have read many articles propounding the benefits of diversity in the corporate boardroom. Much research has been conducted by well-regarded scholars and consultancy firms, and some great results have been achieved. Many correlations between a diversity variable (gender, race, religion, socio-economic, other) and some aspect of board or company performance have been identified. However, most of the articles also claim—either directly, or, more often, tacitly—that improved outcomes occur because the board is diverse.

To say that company performance improves because there is a woman on the board (for example) is akin to claiming that red cars go faster because they are red. Such claims stretch things a bit far. They are also patronising to women. There is a world of difference between a correlation and causality. The debate needs to move from talking about the correlation between diversity and performance (most but not all research supports this linkage), to investigating why and how diversity is helpful to improved performance.

One of the most coherent arguments for diversity that I have read in a long time was made by Andrew Leigh, Australian Federal MP, recently. A copy of his speech, delivered at a Progressive Policy Institute meeting in Washington, D.C., is available here. Leigh says that diversity opens hearts and minds to possibilities—a wide breadth of experience and thought is what is important, if high quality outcomes are the goal. In essence, Leigh's thesis is that better outcomes occur when diverse experiences and thought are brought to bear, not because some flavour of diversity is present. I agree. The challenge now is to apply Leigh's argument to board research, to discover what underlying mechanisms are necessary to effective governance and improved business performance.

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