The darker side of the diversity agenda

24/1/2017

Over the years, the boardroom diversity discourse has matured: from women on boards, to other forms of observable diversity, and now diversity of experience and thought. Diversity of thought is perhaps the zenith (but difficult to measure), because complex problems—the type that boards most frequently need to consider and resolve—need to be investigated from many different angles. Rarely does one (only) solution exist. More often, multiple responses are available. The challenge for an effective board is to elicit a full range of options, and analyse them carefully before making the best possible decision. Different perspectives are crucial if high quality decisions are to be produced.

The boardroom diversity agenda is laudable because it shines the light on board performance. However, a darker perspective exists, as I discovered last week when the following comments were made in my hearing.

A person was recounting to their colleague a recent experience as a candidate for a board appointment. He said that he'd been short-listed following a rather intensive initial interview and discovery process, and that things were looking good with an interview with the full board expected. But then the discussion took an unexpected turn: the storyteller related these comments from the appointment committee chair:

You are a strong candidate, perhaps the best. Your skills and expertise, background and approach to team-based decision-making are great. However, we will not be taking you any further because we need to be seen to be meeting public expectations by advancing the diversity mix on the board. I hope you understand.

I walked away, stunned. Is this an isolated case of reverse discrimination (I hope so), or some new form of 'normal', a modern-day stocking of Noah's Ark?

2 Comments

James Lockhart

27/1/2017 14:09:54

To be blunt it is likely worse than what Peter claims above. The root cause of the argument results from real confusion over what corporate governance is; why it is needed; and, what it can contribute actually to business. Once these questions are answered then diversity ought to be embraced. Providing we know and understand what diversity is required - and that is unlikely to be well received for it is diversity of thought (within some reason) as opposed to what directors look like (the measurable visible traits) that appears to be important. But as the understanding of corporate governance rapidly shifts to the point where 'governance' is promoted as being a panacea for all of societal ills the debate on diversity - and what that diversity means to corporate governance - goes with it.

Governance is a mechanism necessary to ensure that the interests of the shareholders absent from the board room are being met. Note to small business, if all the shareholders are in the board room we are talking about something very different. Various jurisdictions state this need in different ways, but by and large the companies acts across the Anglosphere are in unison. Directors act, as required by law in the best interests of the company. The British act includes shareholders.

What has then become of the diversity debate? First, I have no doubt 'we' would benefit from more diversity, and there is some very 'scratchy' evidence to suggest that diversity may contribute to performance. Note here that the overwhelming majority of diversity studies in business have not been conducted in the boardroom. Internationally there have been less than a a dozen studies conducted in the boardroom - ever! So claims of impacts of diversity are being applied to boards from studies of top management teams - it works here so it should work over there. The academic/research community ought to have greater honesty and say, we actually don't know, there are real limitations in the claims being made here.

Peter's point about the diversity argument morphing into representation is valid. Give me a failure, and most times we find gross misrepresentation of interests in the boardroom, often over many, many years. So calls for workers, more women, minorities, young graduates and so on to be in the boardroom make for interesting reading (I have no doubt we need more women in boardrooms, but for the time being we don't even know when men are effective). What we really need are effective directors driving performance - not there to represent a particular constituency. There are much better ways of learning the views and values of a specific constituency that the business has decided to serve, and incorporating that into strategy than having representation rather than effectiveness dominating board selection criteria.

It is diversity of thought (within some workable bounds) that we need, perhaps that may come from more women, I have no doubt it will come from more effective directors, and more effective women directors is inherently appealing. But is it not a representation issue, it ought to be a performance issue. And, it should not be an issue of what directors look like, but about their effectiveness and ability to bring a diversity of thought to the boardroom that is important.

Finally, last year I encountered a PhD completed offshore, where this same argument was played out entirely on grounds of ethnicity - the representation by a minority race on publicly listed boards in that country was argued as now being required by quota - at no stage in 360 pages did the student even begin to consider the board's responsibility for performance. Perhaps I am old fashioned, but give me a board committed to performance first, what they look like is really of no consequence.

30/1/2017 08:56:57

The Dominion Post (Saturday 28 January, 2017, p. C5) leads an interview (Question & Answers) between their reporter Katarina Williams and John Fiso with the heading, "Why we need more Pacific Islanders on our boards". John's response to the question of whether or not he would like to see more Pacific Islanders in the country's boardroom is, however, exactly what is required. He stated that, "... can only change when our overall education achievement rates change and we have greater numbers of Pacific people owning businesses and in management and governance positions". He then went on to observe that, "... our lack of experiences in the private sector. Pacific people must be ambitious and confident enough to back their own skills and ideas".

The Dominion Post it would seem, is quite comfortable to confuse representation with performance in the board room of New Zealand's businesses.

The darker side of the diversity agenda

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Peter Crow PhD CMInstD