There is extensive commentary around governance diversity in recent years. A recent article in the Huffington Post gives another timely reminder of the importance of diversity in business.
It states that women in top roles “is a bottom line, strategic business imperative, not just a nice thing to do!”. Huffington post argues that women in top roles are at least part of the answer to avoiding groupthink, where common sense and logical decision making take a back seat in favour of consensus.
The research psychologist Irving Janis pioneered initial research on the groupthink theory nearly 45 years ago to describe “extreme consensus seeking tendencies”. Commonly cited examples of groupthink include the UK companies British Airways and Marks and Spencer in the 90’s. Following years of profitability and success when faced with challenging markets the illusion of invulnerability led to both companies underestimating the elements resulting in their fall in reputation and stock market valuation. The infamous Enron scandal is a cautionary example of the potential link between groupthink and unethical behaviour.
New Zealand has a number of not insignificant efforts around initiatives to improve boardroom diversity, the New Zealand Institute of Directors “mentoring for diversity” programme and the Future Directors programme to name just two of them. In recent years in New Zealand there has been a big increase in senior people “sponsoring” women and ensuring they not only have visibility but are also connected with opportunities. There are many business leaders and board directors who should be applauded for their leadership and commitment to this business and society critical imperative.
We know the business case however, it needs less commentary and more action. With only 13% female representation on NZX listed companies in 2014 (20% of our top NZX companies have no female representation), we are a long way behind other parts of the world. However the participation rate of women on our state sector boards is 41.7%. In the UK the number of women on FTSE 100 boards has reached 25%. In Australia 20% of public companies have female board representation, and in June Australia’s S&P/ASX 200 companies were asked to publicly commit to increasing the proportion of women on their boards to 30% by 2018. This is a serious call to action which reinforces that New Zealand needs to continue to commit to action and bring a depth of diversity to our boards.
Diversity should be about all possibilities which foster diversity of thinking including age, ethnicity, skill set, background and experience. Seasoned board directors argue that boards should have a mix of new thinking coupled with strong corporate memory. Behaviours are becoming increasingly important. Perhaps we could take the learnings from the investment firm Blackrock “Our solutions must reflect the changing, dynamic nature of our world, and the diversity of the people we hire must reflect the diversity of the clients we serve.” Investment in diversity will enable organisations to look forward to set strategies reflective of a dynamic and rapidly changing world.