The window and the mirror

The stereotypical white male middle-class board, ill serves most companies at a time when nearly all significant businesses face intense competition.

Market forces are encouraging Chairs to take a critical look at the profiles round the table. Both commercial and public organizations are under fierce pressure to deliver value. For commercial enterprises this is profit and profitability; in the public sector it is the efficient delivery of universal services.

The emphasis on diversity in the Higgs’ corporate governance Code, two years ago, stimulated a fresh focus on the composition of commercial boards. The public sector has shown the way. Even though political correctness is frequently derided, government has led the commercial world in placing qualified people from diverse backgrounds into leadership roles.

Are boards really changing for the better? The evidence is only moderately encouraging. Too many boards remain staffed by men, with similar education, career paths and social tribe. A really effective board must understand and respond to the markets it serves now and in the future. A monoculture tends to look inwards and fails to test its own assumptions. Better to look out of the window than in the mirror.

The old Marconi board was widely seen as uncritically homogeneous, leaching Lord Weinstock’s capital on a series of high-tech acquisitions, egged on by the City and the media. Its board members were highly skilled, yet it seems no one asked whether the Emperor had any clothes. Collective responsibility matters, but groupthink, however good the group, can wreck value.

There is an internal imperative, too. Corporations no longer offer merely employment, but membership. They expect commitment, not just work from their staff. If a company is to engender loyalty, employees need to be led by people whose ethos and values they share.

There are sound commercial reasons for promoting diversity in the boardroom. We need to be clear, though, about what we mean by diversity. Diversity takes many forms. Legislation addresses age, gender, race, religious beliefs, disability and, sexual orientation but there are other dimensions such as education, place of residence, class, occupational status and life experiences.

There are a few notable examples of women in leadership spanning a wider range of business sectors. The list includes 1. Sadly, there are very few men and women of minority ethnic backgrounds in visible leadership positions. The list includes 2. Many are in family and unquoted businesses and their children and grandchildren can be noticed.

Change is coming, but slowly: we are far from embracing and utilising difference in its widest sense. The temptation to recruit known and trusted quantities is strong.

For example, the percentage of women on FTSE boards has risen from 10 per cent to just 11.4 per cent in the past two years and on French boards from six per cent to 7.6 per cent, according to a recent survey. In Germany the figure has dropped from 10 per cent to 7.2 per cent – and two-thirds of those are employee representatives.
Try a different way of looking at diversity. A multiplicity of ideas and approaches emerges when boards absorb people from different fields and backgrounds. A new dynamic is created. In the past year, Andrew Harrison, former Chief Executive of the RAC, became the CEO of easy Jet; Paul Deighton, Chief Operating Officer of Goldman Sachs Europe, became chief executive for the London Organising Committee for the Olympic Games (LOCOG); and Luqman Arnold, former Chief Executive of Abbey National, became chairman of the Design Museum.

As headhunters, we see moves like these with increasing frequency. In fact, many organisations positively seek people from outside their sector. Implicit is an acceptance of the need for a fresh approach. As time passes, that acceptance is becoming more apparent.

The CBI went for diversity of the deeper kind when it appointed, Richard Lambert, the former Editor of the FT, as its new Director-General. In time, the culture change that appointments like his represent will acquire impetus.

The most forward-looking organizations are those that have recognized the changing demographic trends, availability of skills and the benefits to be gained in employing a richer and more diverse workforce. Valuing diversity emphasizes inclusion and mutual respect and it makes business sense. Nothing illustrates an organisation’s attitude to the future more clearly than its choice of new board members. By this measure, corporate boards are starting to turn away from received wisdoms. They are looking out of the window, at a fresh thinking outside world, for new members. This is good for business and society.