House of Lords inquiry’s final report on ‘Women on Boards’

The House of Lords inquiry’s final report on ‘Women on Boards’ has just been published:

121109 House of Lords final report on ‘Women on Boards’

The inquiry was called to respond to Viviane Reding’s threat of legislating EU-wide quotas for women on corporate boards. Given Mrs Reding’s utter contempt for everything sent to far by the British and other governments – including the official DBIS response in May 2012 – we shouldn’t expect this new report to influence Mrs Reding in any way. But hope springs eternal.

The report’s opposition to EU-legislated quotas reflects official government policy, and shouldn’t surprise us. Given that the select committee only took oral evidence from people who are supporters of ‘improving’ gender diversity in the boardroom (‘GDITB’), many of them professionally involved in the initiative, and declined our request to give oral evidence, we also shouldn’t be surprised that the report strongly supports GDITB throughout. We were given a written assurance that equal weight is given to written submissions as to oral submissions, and our written submission pointed to strong evidence that GDITB has a negative impact on corporate performance.

So… equal weight. Let’s see, shall we? We counted a total of 85 references in the report to Cranfield and/or the 30% club, the leading proponents of GDITB in the UK. There are just two references to our own written submission. The first is a rejection of our key argument – that GDITB has been shown to lead to a decline in corporate performance – although no grounds are provided for the rejection. The second reference is, ironically, to one of the key studies (Ahern/Dittmar) which underpins that key argument. You couldn’t make it up.

So far, so depressing. But it would be a mistake to miss a key admission in the report. From the Summary, p4:

The report begins by stressing the benefits that come from a gender-balanced board. A more balanced board will be able to tap into the wealth of available talent in the labour market, provide a broader spectrum of ideas, better reflect a company’s customer base and improve corporate governance. We did not, however, find proven the argument that there is a causal link between more gender diversity on boards and stronger financial performance…

At last, an admission in government circles, in an official report, that there’s no evidence of a positive causal link. (A timely admission, given that earlier this week we had the same admission from Viviane Reding’s private office, an earlier post refers). There is, of course, strong evidence of a negative link – as strong as evidence can be in studies in this field, from longitudinal studies with panel data – but we’ll have to hope that the forthcoming House of Commons inquiry on ‘Women in the Workplace’, at which we’ll be giving oral evidence, will review that evidence.

Also from the Summary, p4:

We do not consider that the Commission has made its case for stronger action in the form of a quota for women on boards. We consider that quotas should not be resorted to until all other options have been exhausted. They generate negative perceptions amongst women and business leaders and do not address the root causes of inequality. Quotas should be used only where business has shown itself unwilling to change its ways.

We have a reference here to the government’s ‘voluntary’ business-led approach, which is official policy. It’s the same argument used by the mugger who threatens you with violence if you don’t hand over your money ‘voluntarily’. On p12 we come to the following assertion:

Some studies point to the fact that greater diversity, particularly of gender, can have a positive effect on corporate performance.

‘Some studies’ refers, of course, to studies seeking to misrepresent correlation as causation. The cited sources for this remarkable (and, of course, utterly erroneous) statement are the following:

IMA, Fawcett Society, An Inspirational Journey, Professor Sylvia Walby, Aviva, Arlene McCarthy MEP, Mary Honeyball MEP, NEST, European Commission, Q55 (Lord Davies of Abersoch), Q48 (Jonathan Rees, GEO), Q113 (Joanne Segars, NAPF), Q246 (Helena Morrissey), Q298 (Jo Swinson MP)

So, the ‘usual suspects’ then. We’ve challenged many of these organisations and individuals to cite even one robust study showing the ‘positive effect on corporate performance’, and collectively they’ve supplied nothing. However, things pick up on pp 12/13:

The last of the stated business benefits [C4MB: a positive effect of gender diversity on corporate performance] is the most contentious. The idea of a demonstrable financial benefit derives from studies by the consulting house McKinsey and Catalyst, a research and advocacy organisation for promoting female career development, which suggested a correlation between women’s representation at board level and the financial performance of companies worldwide. These assertions have been reiterated in subsequent studies and were drawn upon in evidence by the Government. However, Professor Susan Vinnicombe OBE, Director of the International Centre for Women Leaders at the Cranfield University School of Management, noted that Catalyst and Cranfield had now renounced this line of argument owing to the difficulty of inferring causation from the data.

We do not find the case for a causal improvement in the financial performance of businesses from increased female representation, in terms of improved revenues or returns on investment, compelling in the form advanced at present. There are too many other factors to take into account for diversity to be disaggregated reliably, and the fact that the case has been renounced by some of its most notable former proponents is indicative of its weakness…

We come on to an extraordinary statement on p13:

It should be stressed that we reject any suggestion that improved diversity would be to the detriment of company performance, as was argued in some submissions we received.

The (written) ‘submissions’ cited here were from ourselves, Michael Klein and Ray Russell. Both we and Michael Klein (now this campaign’s Research Director) cited two studies which show a negative impact of GDITB on corporate performance, the Ahern/Dittmar study and the Deutsche Bundesbank study. The committee is, therefore, implicitly rejecting not our ‘suggestion’, but these studies. We might reasonably ask, on what grounds is the committee rejecting them? Later today I’ll email the chair of the committee, Baroness O’Cathain, to ask this very question. I’ll copy the other peers on the committee for whom I have email addresses.

My hunch is that Baroness O’Cathan (if she responds) will employ the standard criticism of studies showing the negative impact of GDITB on Norwegian businesses, that the quotas were legislated, and the UK has not yet adopted legislated quotas. This ignores, of course, the obvious point that the threat of quotas has caused a more than fourfold increase in the proportion of new FTSE100 directors who are women in just two years (from 13% to 55%), and all the women appointed in 2012 have been as non-executives. The appointment of women as non-executives is the same ‘solution’ that was adopted by Norwegian companies in the face of legislated quotas. The ‘solution’ still led to declines in corporate performance, as Ahern/Dittmar and others show.

Ironically, given the above, the report recognises the existence of the Ahern/Dittmar study. On p.22 we find:

There were also concerns that quotas would lead to practical problems, with attention drawn again to the experience of quotas in Norway. Some cited research indicating that the quotas there had led to a reduction in shareholder value…

The ‘cited research’ is the Ahern/Dittmar study. No mention is made of the Deutsche Bundesbank study.

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About Mike Buchanan

I'm a men's human rights advocate, writer, and publisher. My primary focus is leading the political party I launched in 2013, Justice for Men & Boys (and the women who love them). I still work actively on two campaigns I launched in early 2012, Campaign for Merit in Business and the Anti-Feminism League. In 2014 I launched The Alternative Sexism Project, aiming to raise public understanding that the sexism faced by men and boys has far more grievous consequences than the sexism faced by women and girls.
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