During the week I saw a piece in the AFR quoting Graeme Samuel on the topic of female directors.
Mr Samuel, who is chairing a capability review into the Australian Prudential Regulation Authority, also launched a tirade at the female director club, saying the clique needed to be destroyed, as he questioned the skills of many of the nation’s leading women directors.
“There is a wall that needs a nuclear bomb to smash down the impenetrable wall around the female club of directors,” he told The Australian Financial Review Banking & Wealth Summit.
The co-author of the prudential inquiry into the Commonwealth Bank said directors of both sexes often lacked courage, and the ability to challenge management.
But he saved his most savage criticism for a “club” of female directors, which he said was “absolutely” worse than the male directors club.
He said some of the well-known names within the top league of 30 female directors “have some record, but I’m not sure the record in many cases is properly deserved”.
He said the club was locking out a bigger group of potentially high quality women who were struggling to break into the scene.
Well – them’s fighting words. Return fire was swift.
Chairman of Woolworths and Origin Energy Gordon Cairns led the barrage of criticism on Wednesday to claim Mr Samuel was out of touch.
“I would say there is a boys’ club which is slowly being broken open, I haven’t seen any girls’ club,” Mr Cairns told The Australian Financial Review.
Director and chairman of Oz Minerals Rebecca McGrath called it an “extraordinary and inflammatory statement to make in a public forum”.
“Why any senior businessmen in public life would choose to stoke the flames of the ‘gender wars’ with this kind of negative and ill-informed statement, at this time, astonishes me,” she said.
Telstra director Nora Scheinkestel quipped that Mr Samuel must have “got out of the wrong side of bed”.
President of Chief Executive Women, Sue Morphet said it was disappointing that “someone of the previous standing of Graeme Samuel is so misinformed about the diversity of directors on boards”.
“I had to check the date of the reporting to make sure it wasn’t something he said last century that had suddenly reappeared,” she said.
Chair of the 30 per cent Club Nicola Wakefield-Evans also called the comments misguided.
“I suspect that Mr Samuel does not personally know or had any business connection with the majority of female non-executive directors so it is difficult to accept his questioning of the skills of many of the nations leading women directors,” she said.
Wesfarmers director Diane Smith-Gander – who has been appointed by the government to work with Mr Samuel in his review of APRA – said the broader point is nominations committees need to be held to account.
“This means understanding what merit looks like in a prospective director for their company – in men and women,” she said.
Here is Samuel making his excuses.
My fundamental message is that we need better directors. Anyone who has any doubts about that need only read the APRA Report into the governance, culture and accountability of the CBA, together with the final report of the Hayne commission. Hayne devotes a whole Chapter 6 to the issue of governance – his findings mirror those of the APRA CBA Report.
Surely after reading these reports, those interested in being informed would be asking themselves, who was governing the organisations the subject of these reports? Were they up to their responsibilities, were they good directors? I don’t have to provide my own judgment – the reports do that for you.
I’m calling “Bullshit” – his “wasn’t me” defence is rubbish. Unless APRA and/or Heyne provided actual evidence that there is a clique of somehow sub-standard female directors crowding out other women he has failed to defend himself.
This morning in The Australian Janet Albrechtsen defends Samuel with some numbers.
Proxy advisers will tell you, again only privately, that there is a small group of women who, how shall we say this, are “very busy” and “getting busier”.
Never mind the silence; the numbers give the game away. Research by governance firm Ownership Matters shows that at the end of last year, 38 female directors in Australia held three or more ASX 200 board seats. There were 25 men in the same position. At the end of last month not much changed, according to data gathered by the Australian Institute of Company Directors, with 32 women holding three ASX 200 board positions compared with 26 men in the same position. Whereas four women held four board positions, only one man did.
I’m happy to take those numbers on face value. It is the interpretation of those numbers that is the problem. The first interpretation is conspiracy. The second interpretation is a solution to an information problem and a shortage of appropriately qualified women.
Samuel is not a dinosaur. His language may have been in search of a headline but, as the country’s former competition regulator, he can spot a lack of competition — be it in the boardroom or between supermarket titans.
I disagree with this paragraph – Samuel is a dinosaur. As former competition czar is his beholden to a field of economics known as the structure-conduct-performance model. In short this is a big is bad approach to economics or a concentration is bad approach. It informs anti-trust and competition policy all around the world. If you see large business or a concentrated industry this must be due to barriers to entry and clearly consumers are being exploited. In this of the world there is no role for better and more efficient businesses to become large by better meeting the needs of consumers.
In her piece Janet actually provides an information cost explanation for why we might observe a small number of very busy female directors and the supply problem.
Many more qualified men make up the men’s club, which means when you pick a member of that club, you don’t know in advance that he may end up being rather mediocre in the role. By contrast, targets to get 30 per cent or 40 per cent of women into board seats within a short timeframe, mean that corporate Australia is institutionalising female mediocrity. When you appoint a woman, you knowingly risk choosing a less qualified woman to fill a female-targeted seat. Unless you pick from the few very experienced female board directors. And, hey presto, that dilemma means members of the Golden Skirts club get busier and richer still.
Now I don’t agree that this could institutionalise female mediocrity – that is an empirical question and more below on that.
The supply problem relates to female participation rates in the economy. To become a director requires many years of corporate experience. But it wasn’t that long ago that women simply did not pursue corporate careers. Within living memory married women were expected to quit the formal economy upon marriage and certainly if and when they had children. Now social attitudes have changed very quickly yet there is very likely to be a shortage of women available for these roles relative to men. That will change in time.
Now it seems to me that there is a role of some careful empirical analysis – are female directors better or worse than male directors? Some Australian evidence would be helpful. What is the stock market reaction to the appointment of female directors? Is that reaction different when an existing female director is appointed or a new addition to the list of female directors is appointed? (It might not be possible to get a clean sample for this – but an honours students should at least look at it).
Samuel made a series of (quite nasty) allegations – and I’m sure everyone has anecdotes and horror stories and what-not. A lot of what he said is testable – he should be able to produce evidence for his statements. Ultimately, however, the numbers themselves don’t automatically support his story. There is an efficiency explanation for those numbers.
Update: I had planned to comment on this argument:
Fact is, AMP appointed a bunch of tokens. After they blew up the same instos who cheered diversity chucked them out and replaced them with real directors.
The important point being that people are quickly found out in this business.