In an article in today’s Australian by the chair of the Australian Institute of Company Directors, Elizabeth Proust, she states
Australia needs more diversity on its boards, not less. Diversity of thought, experience, background, ethnicity and — yes — gender, guard against groupthink and enhance decision-making.
Effective boards must have a breadth and depth of individual experience to interrogate management, oversee strategy, deliver long-term value for the organisation and, most important, challenge each other.
The business case for diversity on boards is irrefutable. Diverse boards and leadership teams lead to better outcomes for stakeholders and for shareholders. Diversity leads to greater innovation, more rigorous questioning and stronger bottom lines.
Well perhaps yes, but more diversity is not always better. Should we have a diversity of age too – representatives from different age cohorts including those in their teens and those in their 90s? Or diversity of IQ? And what if the board is so diverse that it is incoherent?
If we divided the population up into the major categories specified in the ABS Census: age, income, location, gender, sexual preference, ethnicity, religion (and agnosticism / atheism), etc and then selected a board comprised exactly of the proportions of those characteristics would it be axiomatically superior to another board composition? I doubt it.
But I do agree that boards do need diversity of opinion. Sadly that is the one thing that is not diverse – groupthink is a common feature in Australia’s boards. And that’s because they are selected by the club network. You get a board position not because of your skills, experience or quality of thinking. No, you get a board position because you’re a member of the club or you know David Gonski and that you hold similar views to other club members.
There are so many more capable people that could sit on boards but are denied because of the club mentality. A mentality that has condemned Australian boards to consist mainly of superficial clones with no diversity of opinion. And a system that has rewarded the insiders by making it seem their numbers are small and thus bidding up their remuneration. Our boards have been captured by the mediocre. Where are the eccentrics? Where are the philosophers? The geniuses? Certainly not on any Australian corporate or government board.
There are too few directors, on too many boards. A person should only serve on one board (and I’m not talking here of small NFPs) – it shouldn’t be a portfolio of boards which seems to be attractive to older men and young to middle aged women.
Despite Proust’s list of diverse attributes including diversity of opinion, the AICD is only campaigning on one: diversity of gender.
Catherine Brenner, the former AMP chair, may have been a good investment banker and intelligent. But does anyone for a moment think that a man of the same age and same experience and background would have been appointed as AMP chair?
The most important characteristic of a board member is wisdom. That is something denied to most people, and rare to find in the young. Its chief characteristic is knowing one’s limitations. Boards need far more wisdom.
A board that consisted of wise and ethical people will always be superior to any other board composition. We should be pushing for people who hold to philo-sophia. Minerva should be the guide. Instead mediocrity is the principal attribute of today’s board members.