Comment: Boardroom balance helps companies thrive

IS THERE a diversity dividend? Mounting research certainly suggests so, yet many employers continue to fear that any concerted move towards heterogeneity will force them to bypass those best qualified for “the job”.

A shortage of women in the boardroom can be a real problem. Picture: Contributed

Top of the agenda for some time now has been the shortage of women in the boardroom. A report earlier this month from Catalyst, the non-profit organisation for women in business, revealed an improving yet highly imbalanced picture across the 20 countries it examined.

As the first country in the world to mandate female representation in the boardroom, it’s no surprise that Norway came out top, with 35.5 per cent of seats held by women. At the other end of the spectrum sits Japan, whose female boardroom representation of 3.1 per cent is less than a tenth of that of Norway.

Nestled at the top of the third quartile is the UK. Despite shunning official quotas, efforts to reach voluntary targets mean that women now account for 22.8 per cent of FTSE 100 board seats, up from roughly 3 per cent 20 years ago.

So the gender gap is closing, at least in some countries, but does it really matter? Catalyst argues that balance is not only good for society but also benefits business. It has produced research to back up this assertion, as have others.

Management consultancy McKinsey & Co studied 366 public companies in six countries – Brazil, Canada, Chile, Mexico, the UK and the US – and found a statistically significant relationship between diversity in the upper ranks and improved financial performance.

McKinsey not only examined the gender divide but also the question of ethnic diversity – a topic too often overlooked in the UK. Businesses with the most gender-diverse leadership were 15 per cent more likely to report financial returns above their national industry median, but the best performers on ethnic diversity were 35 per cent more likely to outpace their peers.

Such findings suggest that a lack of variety is holding back UK PLC, where despite recent growth in the female ranks, boardrooms remain the domain of white men.

Gender and ethnicity aren’t the only variables in the diversity equation. There is no substitute for know-how, yet a mixture of age and experience is vital. Social background is another concern – nearly half of FTSE 100 senior executives are privately educated, even though just 7 per cent of the UK population go to private school.

There are compelling arguments for redressing such imbalances. Looking at companies in its home country, the National University of Singapore found that boards including both genders, at least two ethnic groups and two generations produced an average return on assets of 5.1 per cent. Those with no diversity came in at 1.1 per cent.

It’s time to widen the debate on diversity – business can’t afford not to. «