The darker side of the diversity agenda

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.

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