A few years ago, I attended a meeting at an organisation with some of my colleagues. After introductions from both companies were made, the senior manager remarked on the quality of his organisation, particularly, the diversity in his company. The speaker’s numerous colleagues shuffled awkwardly in their seats as I was the only women in the room, and this resulted in nervous laughter at the irony of the situation. The same manager then steadfastly refused to engage in a discussion on environmental risks, going to the length of threatening to throw us out of the room if we wanted to discuss ‘fluff’. Less than a year later, the organisation went spectacularly out of business leaving shareholders and investors out of pocket. I often reflect on that memorable meeting and wonder about the type of company culture, obvious lack of diversity, and the role it might have played in the company’s demise.
The representation of women in executive management and on boards is woeful. The UK recently reported an increase over the last year from 12.5% to 15.6% in the proportion of women on boards. This news is pleasing although 15% remains a paltry representation of women at the senior level of the corporate world.
In Australia, the representation is an even lower 13.5%, although this is a jump from 8.5% in 2010. The increase could be due to improved awareness to increase diversity at board level or a reaction to federal government warnings that quotas may be considered if Australian companies don’t lift their game. While Australia lags behind the UK, the increase is a step in the right direction. After a little searching, I discovered Women on Boards which is an Australian company that works to help improve the number of women on boards.
The latest McKinsey Quarterly has an article reporting research into the relationship between top performing companies and their gender and cultural diversity on executive boards. They found companies in the top quartile of executive board diversity had returns on equity that were 53% higher than those in the bottom quartile. While the research is acknowledged as not being conclusive, it suggests corporate diversity is indicative of top performing companies.
The case for diversity at the senior levels of corporate governance is a case against ‘group think’. If a team comprises a mixture of age demographic, gender and race, this will increase the quality of discussion and improve decision making. I guess one could compare this to the natural world, where levels of biodiversity are indicators of the overall health of a system. It is my hope that levels of diversity in senior leadership teams, including boards, continue to climb, so companies are more resilient, financially and socially sustainable.