The gender diversity delusion

It is frequently and confidently asserted (and inferred) by proponents of ‘improved’ gender diversity in the boardroom – henceforth ‘GDITB’ – that there exists a demonstrable and positive causal link between GDITB and improved corporate performance. What is the evidence? A 2007 McKinsey report, Women Matter, is frequently cited by proponents. We find the following statement in it:

‘The statistically significant studies show that companies with a higher proportion of women on their management committees are also the companies that have the best performance. While these studies do not demonstrate a causal link [my emphasis] they do, however, give us a factual snapshot that can only argue in favour of greater gender diversity.’

In 2010 David Cameron appointed the Labour peer Lord Davies of Abersoch to report on GDITB. The outcome was the Davies Report, Women on Boards, published in February 2011. In the Executive Summary we find a confident reference to the McKinsey report, and then a clear inference of a causal relationship between GDITB and corporate performance:

‘Evidence suggests that companies with a strong female representation at board and top management level perform better than those without1 and that gender-diverse boards have a positive impact on performance2

1Women Matter, McKinsey & Company, 2007


The report shows the superscript – 2 – at the bottom of the page but no reference source for the assertion is provided.

Only two independent studies show a causal relationship between GDITB and corporate performance, and it’s a negative one. The first study was carried out by two academics at the University of Michigan, Kenneth Ahern and Amy Dittmar, and the latest draft was published in May 2011. The report’s full abstract:

‘In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.’

Proponents of GDITB have claimed that the negative effect of legislated quotas on Norwegian businesses reflects only the effect of inexperienced directors, rather than any gender effect. So what do we find when organisations voluntarily ‘improve’ GDITB, appointing more female directors on the grounds of perceived merit? We turn to a discussion paper prepared for Deutsche Bundesbank earlier this year, titled ‘Executive board composition and bank risk taking’. The researchers studied German banks over 1994-2010. The report’s full abstract:

‘Little is known about how socio-economic characteristics of executive teams affect corporate governance in banking. Exploiting a unique dataset, we show how age, gender, and education composition of executive teams affect risk taking of financial institutions. First, we establish that age, gender, and education jointly affect the variability of bank performance. Second, we use difference-in-difference estimations that focus exclusively on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a higher proportion of female executives [my emphasis]. In contrast, if board changes increase the representation of executives holding Ph.D. degrees, risk taking declines.’   

The British business community is, I contend, suffering from a collective delusion about GDITB. The multiple explanations for this delusion merit another article in themselves.  

Mike Buchanan is author of The Glass Ceiling Delusion: the real reasons more women don’t reach senior positions.

I'm a headhunter - I work with FTSE 100 & 250 Chairmen and Chief Execs to hire Executive Directors and Non Executive Directors to boards and operating committees, and sometimes below that as well. I have worked in this field for years and have never heard of Mike Buchanan before stumbling across him on LinkedIn the other day. I didn't bother reading much of his material; only because it quite quickly became a ranting, somewhat bitter echo of itself - saying the same things over and over about lack of causal evidence linking gender diversity and better company performance etc. This is a common means of throwing out the baby with the bathwater; of discrediting and derailing the entire common sense agenda of having more diverse boards because of a lack of empirical evidence to back up one claim. True, this claim of achieved empiricism in linking better company performance with having more women on boards was premature and poorly made by those authoring the reports, and in citation by the government. And I also understand that a focus on gender in isolation isn't ideal and can be quite annoying (diversity has a much broader definition - diversity means “capable of various forms"), but you have to start somewhere, you have to pull the issue apart and focus on more manageable strands unfortunately, as otherwise its a beast which is too big to wrestle with - hey ho, again, get over it. I wish it wasn't this way, but it is. (What about the need for boards to represent the geographical diversity they serve, for example. I have been engaged to do just that for one financial services organisation.) So get over the slightly irritating focus on women (which most senior women I meet do find somewhat irritating), and get over the (again, irritating) error in linking their presence to proven performance benefits - there's a much broader, more fundamental issue at play here which has support from nearly all business leaders - making sure those in power - in business or politics - adequately understand, reflect and respond to the socio-cultural changes our world has undergone and is undergoing. Otherwise they become irrelevant; they will fail to bring a range of views to bear to create healthy discourse and challenge in decision making, and our businesses and governments will fail. With women making 80% of purchasing decisions in households, and accounting for OVER 50% of all graduates in this country, how can we truly claim to have the broadest and therefore strongest leadership base with only 12.5% non-male board directors in the FTSE 350? (% figure as per the time of writing Lord Davies report in February 2011). Diversity is not about applying misplaced, pappy, neo-liberal notions of fairness to the boardroom. It's sad and a bit worrying that some apparently intelligent men of today persist in confusing the current agenda with this (most women hate this notion too) and react in this kind of threatened and defensive way (judging by Mike's ranting). If this were so, the Chairmen and CEOs with whom I work would not tolerate government intervention of ANY kind. They would themselves rise up against it (thought I doubt they would choose images of bullish schoolgirls looking for a fight, or Halloween masks of female zombies for their book or report covers..,. I mean, what?!?!). I have sent a few links to a few FTSE 100 Chairmen and they are horrified that such commentators dare to speak on their behalf: "People such as this take us [business leaders] for fools on this topic - our jobs are to run sustainable businesses which are designed to capitalise on change rather than suffer from it. PLC company boards must evolve faster than they have done, to include more people who don't look, sound and think the same - our world in which we operate has changed and so must we." What's more, intelligent leaders of today, whether male or female, will understand that our society in the West is in transition when it comes to gender under the premise "sex is biological; gender is cultural". Gender identity concerns individuals' perception of themselves as and identification with being female or male. A gender role is the set of societal expectations that dictates how an individual of a gender should behave, think, and feel. During the past century, perception of all three aspects of gender have changed, particularly that of gender roles. Both men and women and re-navigating our sense of what the gender roles mean collectively and indivually in 21st century, especially in relation to work. This learning process involves understanding how women are held back and hold themselves back in business because of the legacy left by millennia of patriarchy. This has implications for companies wanting to retain a more diverse talent base through to leadership levels. I myself was brought up by parents who thought their daughters should have more responsibility in the house and with the family than the sons, and I have developed feelings of guilt when choosing a career over a home-based life partly because of this type of treatment. But at school I was made aware of it, and at work I was told to challenge any unconscious or conscious judgement made of me in this sense. I have and I do succeed in doing this, but it does add an extra dimension to my working life that I imagine most men would be unaware of, unless told, or perhaps unless they see their daughters experience it. This is subtle stuff which is not a women's issue but a societal one. As a CEO recently wrote to me:"Getting a more balanced board does require a shift in mindset that the boys are less inclined to make because they don't come face-to-face with why we need it. The shift involves acknowledging subtle cultural schemas with regard to gender roles, which have and do hold women back at work (many holding themselves back according to what they think is required of their roles), leading many to choose other paths when we need more of them to stay in business!". I read in one of Mikes rants that women make choices to stay or leave work, and that we should stop making allowances or advantaging' them therefore - he's right, but we must look at the broader cultural foundations we have built which encourage these choices, and figure out if and how we want things to be different. Seems like you guys need to accept that most of the world wants a different basis for making choices, even of those choices are the same.... The simple assumption that women “opt out” of the workforce promotes the belief that individuals are in control of their fates and are unconstrained by the environment. This is very, very silly.
Thank you for your contribution to this debate. A few thoughts: 1. You accuse me at several points of 'ranting'. I invite you to point to even a single example of this. You're using a shaming tactic, which only serves to harm your credibility. 2. We've already had one contributor (Female entrepreneur') who lacked credibility from the outset by not revealing her identity. To be fair, she then proceeded to destroy any credibility she might have had by her comments. People who've read her comments are united in the belief that she cannot possibly be a prominent entrepreneur (most doubt she's even an entrepreneur at all). So why not reveal your own identity? If you truly work with FTSE100 and FTSE250 Chief Executives and Chairmen, why would you want to hide your identity? Until you reveal it, excuse me for doubting that you work in the role you claim. 3. I invite you also to reveal the identity of the Chief Executive who wrote the letter you claim to have been sent. Do ask him / her first, obviously. 4. Running throughout your entire comment is a militant feminist thread. I refer readers to such lines as, 'Women are held back... by millennia of patriarchy'. Can we assume, therefore, that the term 'man loving' in your blog name is ironic? 5. You seem to be denying that men and women willingly make different choices with regards to work. In fact, the evidence that they do so is very robust - Dr Catherine Hakim's Preference Theory comes inevitably to mind - and I shall be presenting some of it at my presentation at the IEA. I invite you to attend the event and engage in a calm, rational debate on the topic of gender balance in the boardroom, for which your professional role clearly qualifies you. To the best of my knowledge, it will be the first example of such a debate anywhere in the world. It is, to put in mildly, long overdue. 6. I'm aware of only two studies showing a CAUSAL link between increased representation of women on boards and corporate financial performance, and both show a NEGATIVE link. Theyre the studies cited in my IEA piece. If you're aware of even one study showing a positive causal link, would you be so good as to share it with the world by referring to it on this blog? And if you cannot do so, are you of the view that damaging companies' financial performance is a worthwhile price to pay for increasing the number of women on boards? 7. You might be interested in a recent admission by a leading proponent for more women in the boardroom: Have a nice day. Mike Buchanan
I have followed this blog and read with interest the diverse comments made and can find no "ranting" only objective views from a variety of individuals with one notable exception the "Female Entreprenuer" who's views clearly have no basis in intellectual or scientific argument. The platform given by the IEA for this subject would not be allowed if it was for an individual/s to just rant as they have significantly higher satndards than that however they do want robust debate from both sides of the argument. Mr Buchanan, like so many other commentators on this subject, is systematically shamed and put down for his views which in a democracy is disgraceful. His detractors should however openly challenge him and the many other men and women who share his views to a public debate where infantile playground shaming tactics are definately put to one side.
In my line of work?? I most definitely do not want to associate myself with Mike Buchanan - my clients confirmed my view on that. Forget his writings and his extremist supporters for a moment - the covers of his books are enough to keep my name well clear, even if the books are great! A shame - if Mike's visual branding was not so inflammatory, I probably would put my name to this. He might get a more influential audience, too! Gives sympathy to the feminists, a bit of an own goal, eh.... Similarly, if he wasn't self-published, there may be more credibility there, unfortunately for him. There are so many others out there writing on this topic (many of whom Mike follows I would imagine) who find a publisher to invest in them..... By ranting, Doris, I refer to Mike's broader self-published catalogue which seems to makes the same point over an over about [lack of] causal links, which I accept and actually agree with as I said before, but tired of a while ago. The repetition has a dementing effect. I'm interested in working through the complexities; it's a huge topic and Mike reverts to an easy low-handing target to discredit the rest of it. I don't want life that easy, I find it boring. Ranting is to speak or declaim extravagantly or violently; talk in a wild or vehement way - there are many, many examples of Mike doing this. This is actually what the Chairmen I was speaking to so disliked (and laughed at) - words such as "coercive quotas agenda" for example - we wont go to quotas in the UK, and to imply 250 business leaders would be coerced into something like that is laughable. It's fear mongering and silly, and harms the impact of what good could actually come out of Mike's writings. (I'm sure there is some, somewhere............) Mike thanked me for my contribution to the "debate" but I think he ranted himself out of debating! As he himself said in a post elsewhere "let us concentrate our time, energy and resources not in debating with feminists but in FIGHTING them". Not extravagant talk, Doris? Bless you for your defence and loyalty. Might I suggest a new, fresh line of argument, to free you from the broken bit in the 'Causal' record? The dynamics of choice, for example, often referred to as 'the choice illusion' is a particularly interesting area receiving much research funding currently. Just a suggestion, feel free to ignore! The accusation of "militant" is hilarious! I have the chuckles. If you extract phrases from my thread, for sure its easy to skew them into something which looks more 'militant' when quoted. But that in itself is using the very shaming tactics you have accused me of. It's a classic, over-done tactic, Mike, please.... I am recovering from an operation, hence have the time to write on here. I am back at work tomorrow, yipppeee, and will not be able to justify any more time to this (as I would not normally be able to do when working) so this will be my last post. Toodelooo good luck with the FIGHT! x
The consistant argument from the government, Fawsett Society, EU, CBI and the IoD has been that coporate performace improves by having more women on boards and that there is a causal effect which has now been discredited and as Mr Buchanan amoung others raised this issue surely he deserves some credit for so doing. You make some interesting comments however I feel that your words are now bordering on anti Mr Buchanan for its own sake rather than finding any merit in what he has to say about the economic case that has so far been the predominent argument from the above organisations for more women on boards. I am loyal to no one particular view however I do enjoy robust economic argument. I do hope you feel better soon following your operation.
‘Anonymous’, thank you for your latest contribution. Let me address your points in turn: 1. I’m not asking you to associate yourself with me, but rather to publicly dissociate yourself from my arguments and reveal your identity (and that of your headhunting firm). We’re interested in having an open debate. Why aren’t you? 2. You appear to think I should be ashamed of self-publishing my books. You couldn’t be more wrong. My first book was published by a mainstream publisher (Kogan Page) in 2008, and while the company was very professional, I much prefer self-publishing, to the point that I wrote a guide to the subject, The Joy of Self-Publishing'. I’ve been delighted by the testimonials my books have received, from eminent professors and others. Besides, among the writers who started off self-publishing were (to name but a very few of them) John Galsworthy, Rudyard Kipling, Virginia Woolf, Mark Twain, DH Lawrence, James Joyce, Stephen King... 3. I’m sorry you don’t like my book covers. Still, as the saying goes, you shouldn’t judge a book by its cover. Feel free to buy copies and cut the covers off, or cover them in brown paper, or whatever. 4. You write, ‘There are so many others out there writing on this topic… who find a publisher to invest in them.’ So many'? Very few of the writers tackling such subjects with similar perspectives to mine have found a commercial publisher. If you know differently, do please enlighten us all. 5. Thank you for conceding the point about the absence of positive causal links, but do you accept the clear evidence for negative causal links? The reasons we persist with this issue are twofold. Firstly, claims of positive causal links aren’t a troublesome minor ‘error’ which will go away, they have for many years been the core of the alleged business case used to justify initiatives to ‘improve’ gender diversity in major companies. Without those demonstrable positive causal links, the business case isn’t worth a hill of beans. Secondly, the myth that ‘improved’ gender balance in boardrooms leads to improved business performance – in turn boosting the economy – is regularly used by the government (by David Cameron and Vince Cable in particular) to justify the continuing threat of quotas. Only a week ago the 'Evening Standard' carried a full-page article by Vince Cable which made such claims, and we reported on the article on our blog 6.We’re sorry you’re getting tired of our focus on the positive causal link myth, but we’re not getting tired of explaining it to anyone who will listen, whether business leaders, politicians, journalists, academics or others. You’re going to be reading more about this in the national press in the coming weeks. 7. Your other points were mostly made by ‘Female entrepreneur’ so I won’t spend my time duplicating those critiques here. 8. I wish you a speedy recovery from your operation, and good luck with hunting those heads. Have a nice day. Mike Buchanan CAMPAIGN FOR MERIT IN BUSINESS
Hi Anonymous. May I suggest that you leave this guy alone to his ranting? He'll reply at length to this short post because he has nothing else to do - no job, no credentials, NO PUBLISHER and so short of support that he's invented "Doris". While we live our successful and fulfilling lives, he's home alone with his computer so leave him be, it's the only humane thing to do. Shame about the IEA though - they used to be OK.
I find it odd that you should consider that i am a figment of Mr Buchanan's it because I am a women, albeit elderly and somewhat scatty , who should not be contributing to such weighty subjects !!. Regrettably both you and Anonymous have input personal ranting's towards Mr Buchanan rather than considered, intellectual or scientific arguments which is a great shame ....but it does speak volumes. I have long been an supporter of the IEA who are to be congratulated for their fair and open minded approach to this issue by seeking objective views on the subject. It demeans you and utterly undermines your arguments by continuing with your personal attacks. There is however time to put that right which I hope is what you do with a coherent, intellectual and scientific rationale for your views which have nothing whatever to do with Mr Buchanan.....I am sure we would all be interested.
@ Anonymous (man loving) female I've read your rather long initial posting twice over now and I still wonder, what this pleading is all about. Let me start at the end in what I hope to become a rather brief statement. Do you want to insinuate that it wasn't you who wrote that post, but the circumstances under which you labour? Well, this will put a final touch to the discussion about free will that kept philosophers over centuries quite occupied. Let's assume that as a human capable to decide based on its free will, you decided to write the comment all by yourself. If so, you must allow others to be equally capable and to make their own free decisions. In fact that is what most scientific theories of action have in common: they think of people as free-willed beasts searching for the best decision under a given set of circumstances. So you will find, as sociological research does for quite some time now, that men as well as women will make decisions with respect to, e.g., cultural expectations. Cultural expectations are a bit odd and hard to come by, but one can quite easily retreat to the assumption that a culture that promotes, e.g., the benefit of raising children will end-up with women and men who want to set-up family. This will inevitably lead to some kind of division of labour which naturally it has to because though both sexes conspire in what could be called a start-up it still - despite all efforts to surpass this impediment set by nature - is women who bear children and while they do so, they cannot attend to, say: board meetings. Thus, they are faced with a simple decision: either family or professional career (as long as they do not want to discuss urgent strategic decisions while giving birth). This little impediment might be one of the reasons why we still find a majority of women who want to care for their family and restrict their professional career to part-time engagements. The amount of this part-time professionalism varies considerably between European countries, however, the pattern is the same in all of them. Hence, some women DECIDE to abandon or restrict career for the sake of something else. You might even find some women and men who pursue a proper career but have no intention to enter boardrooms, which brings me to the final point. You've written a lot about social change. I researched a lot about social change. And, there has been considerable social change over past decades, however, I find your social change myth hard to find in reality. Yes, women make more purchasing decisions and more than 50% of students are female. However, the first "fact" is simply owed to the mutual understanding most couples have, not to say division of labour that leaves the regular splurge to women, simply because they usually have more time than men and simply because it is a cultural trait. It is this cultural trait that claims responsibility for the fact that despite being quite numerous at universities, share of women in companies gets smaller the higher you get. Women simply have a choice, men don't have, they may choose between family and work, and many choose family over work. It is this inequality of what I like to call the individual opportunity space of men and women that we find in empirical research time and time again when about 30% of women state that they intend to set up family rather than pursue a career in business, while about 40% say, that they are undecided whether they will opt for family or career. This is a constant pattern for the last decades and it hardly fits with your impression of the socio-cultural or social change. I therefore suggest reading a favourite article of mine, written by Paul DiMaggio and William Powell in 1983 and headlined "the Iron Cage revisited". In essence it describes the different ways, by which e.g., managers get entangled in a "reality" of their own, a "reality" that has only a faint resemblance with the real world and it explains to some extent the gross deviation between your account of a social change and what is really happening.