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Women on Boards: Transforming or Conforming?

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Oppressing women was never meant to be the outcome of the women on boards cause: we need to better equip women to lead the fear-driven and the share price-obsessed.

I am passionately engaged in supporting more women to reach the top of our largest organisations and I am passionately engaged in addressing the inequalities women face across society. My energy for these two strands, at opposite ends of the feminist struggle, is rooted in my personal experience of growing up poor and in the frustrating (I use that word now, at the time it was hideous) experience of working for a fear-driven, share-price obsessed man. No matter how bloody hard you’ve leant in (with all the sacrifices to your children, relationships, mental and physical well-being that entails) one is left with a choice: compromise on your values and forge a career, or commit to being a leader and find a new home for your talents. A tension leadership consultant Stephen Denning talks to in The Secret Language of Leadership: How Leaders Inspire Action Through Narrative:

Committing to being a leader will sometimes be in tension with having a career. If everything pleasurable, human, emotional, bodily, frivolous is subordinated to one’s career, that is to say, to getting ahead in an organisation, then no psychological space is left for a thoroughgoing commitment to change. There is no room to be a genuine leader.

So, Eve Livingston’s recent piece in The Guardian suggesting “corporate feminism” oppresses women, was like a smack in the face, and I quite like them — we all need one sometimes. Livingston argues that focusing on the individual women that constitute the 1% of earners who earn greater than £119,000 fails as a real model for women’s liberation, and writes:

If capitalism plays a key role in sustaining gender inequality in all of these ways, it follows that a focus on women in corporate leadership may not just be naive and ultimately useless, but in fact a completely false flag. It’s a mantra that feminism is about nothing more than equality with men, but at its logical conclusion this suggests that the appearance of women in any space currently dominated by men is a success in and of itself.

There is not much to disagree with in terms of the thrust of her argument, and what is making me uncomfortable, is that I fear she might be right.

“Too few women get to the top and this is not just about childcare. Women are leaving because the culture isn’t right” said Virgin Money CEO Jayne-Anne Gadhia and when her Women in Finance Charter was released in March, it recommended that City bonuses be linked to the appointment of senior women. According to data published in July, 72 companies have signed the charter. The deadline to sign up is this Friday.

Inherent within this move, is an assumption that having more women in senior positions will alter the culture of an organisation.

Culture is the values, beliefs and behaviours of the current leadership and the legacy of past leadership as reflected in the policies, systems, processes, structures and procedures of the organisation.

Cultural entropy is the degree of dysfunction (friction and frustration) that is generated by fear and the self-serving actions of the leaders and management, and the prominence of potentially limiting values and behaviours, for example: control, caution, blame, internal competition, empire building, short-term focus and a long-hours culture. Where cultural entropy is high decision-making is slow and misguided. In his book The Values Driven Organisation Richard Barrett suggests that the principal source of this dysfunction is:

The anxieties and fears that our leaders, managers and supervisors have about meeting their unmet needs, particularly their unmet emotional needs. They are also the principal source of the dysfunction we find in our own lives.

I’ve written about this topic before. A 2014 study by Roger Jones of Vantage Partners “What CEOs are Afraid Of” uncovered some astonishing insights into the deep-seated fears of 116 executives (25% were women). It appears anxiety over their own death is at the root of it (I recommend they read Atul Gawande’s Being Mortal)

In our largest corporations, cultural entropy exists because the meme of maximising shareholder value is so deeply entrenched in business that many believe that corporations have a legal and fiduciary duty to maximise returns to shareholders. Thoughtful contributors to the attempt to debunk the myth include Roger Martin in Fixing The Game: Bubbles, Crashes and What Capitalism Can Learn From the NFL and Cornell University’s Lynne Stout in The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations and The Public

Stout denounces the idea of a single shareholder measure as “intellectually incoherent” and describes shareholder primacy as analogous to “fishing with dynamite” due to the way the collective catch of fish dimishes after an initial surge when fishermen use dynamite.

Maximising shareholder value depends on a “platonic shareholder” caring about only one stock price at one moment in time. Shareholders, of course, are human beings (they are, I’ve met some), with different values, different interests and different time perspectives. Some shareholders will care deeply about the ethics of those leading the companies they hold stock in, others couldn’t give a hoot about their contribution, or otherwise, to society.

What has occurred therefore, is that maximising shareholder value has become about maximising only the interests of the small subset who are the “most short-term, opportunistic, undiversified, and asocial” (I’ve met a few of them too). Stout suggests that rather than optimising the interests of one group, we should follow the suggestion of prize-winning economist Herman Simon and pursue several objectives and try to do decently well at each — a term he coined “satisficing” (combining satisfying and sufficient).

Net, corporate boards and management make suboptimal decisions for creating long-term value. This undermines their ability to invest and grow and has far reaching consequences on GDP, unemployment and returns to savers and pensioners and, on society.

Writing in Harvard Business Review in 2014, McKinsey’s Dominic Barton and Canada Pension Plan Investment Board CEO, Mark Wiseman make a number of suggestions as to how business leaders and asset owners might spring the “numbers trap” (my phrase) by adopting a true long-term mind-set:

“Proper corporate governance is the critical enabler. If asset owners and asset managers are to do a better job of investing for the long term, they need to run their organisations in a way that supports and reinforces this. The first step is to be clear that their primary fiduciary duty is to use professional investing skill to deliver strong returns for beneficiaries over the long term — rather than to compete in horse races judged on short-term performance.”

So, the women on boards debate is part of a much bigger issue — it is not just about board or even pipeline diversity but part of a more substantive change process affecting the entirety of British business and its role in society. In Cranfield’s 2015 report The Female FTSE Board, interviewees speak of the need for systemic cultural change, at a societal level as well as organisational level.

As one Chairman interviewed says: I profoundly feel that companies have to be grounded in society in a way that they sometimes forget, and maybe this is part of that. Where companies and society part company you have got a very perilous state for business, and capitalism if you like, so that maybe you’ve just got to stand up and say it’s the right thing to do [have more diverse boards] so we will just do it.

So quotas, Gadhia’s charter and organisations such as the 30% club are all driven by a belief that “diverse” boards govern better and make decisions that are cogniscent of the role business plays in society.

However, that female non-executive directors are having a transformative effect on organisational culture is highly questionable. There is a legitimate question as to the efficacy of non-execs in general (Peter Whitehead, writing in the FT stated it is a “task for which no-one is qualified), however I am worried that we are not adequately equipping women to be “board-ready”, particularly with regards to the complexity of creating long-term value.

Women chair the remuneration committees at BP, Smith & Nephew, The Weir Group PLC, Shire Plc and Reckitt Benckiser. All saw shareholders revolt against the executive compensation proposed this year. This, against a backdrop of billion dollar losses (BP); decisions that over-rode existing policies (Smith & Nephew); diving revenues and profits (Weir); a five-fold increase in compensation made 6 months prior to taking it to shareholders (Shire); and deaths linked to the products it produces (Reckitts).

American international bank Wells Fargo & Co are under investigation for their “aggressive sales tactics”. The scandal initiated in the creation of up to 2 million bogus accounts and credit cards for retail clients without their knowledge in an effort to inflate sales numbers, hit targets and boost bonuses. The bank was hit with a record $185m fine – this states, Warren Buffet was part of the problem: Wells Fargo measured the seriousness of the problem by the dimension of the fine. In the grand scheme of fines in banking (which total $30-40 billion) $185m is putting the bank on the naughty step. [June 2017 update: further irregularities have been uncovered relating to “stealth modifications” to mortgages.)

Oh yes, six of the 15-strong Wells’ board of directors are women. At least they’d met their “30 percent club” quota. However, note there are only two women on their 11-strong executive board.

People are rightly questioning whether incentives and executive pay has any connection to the real world. As one BP shareholder put it to the FT recently “there is a worry that remco committees are not working as they should and don’t want to rock the boat. You need to be tough to stand up to CEOs on pay.”

In our desire to improve gender diversity, are we forgetting to equip women for the task of standing up to CEOs and to the small sub-set of “asocial” shareholders? Are we ensuring that they have a sufficient appreciation for the complexity of company valuation, the financial markets and company ownership dynamics? Are we sure that they understand how incentive systems can be designed such that they don’t encourage Wells Fargo type behaviour? Are we sure we are achieving diversity in thinking as well as gender, such that the decisions-made will lead to value creation and not destruction?

I do believe that women business leaders have a critical role to play in leading organisational and societal transformation. I want to believe that they can fix capitalism. However, if we are to see the cultural change required to retain and attract talented women, we must ensure they are equipped to lead this change. We must ensure that they are up to the task of transforming, not conforming.

Oppressing women was never meant to be the outcome of the women on boards cause, however unless we better equip women to lead the fear-driven and the share price-obsessed, I fear that Eve Livingston might be right: focusing on the relatively few women banging their wings on the glass ceiling is naïve and ultimately useless. Aiming for a society in which everyone has enough to survive would seem a more pressing priority than making the rich richer.

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