Shoot this messenger

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.

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39 Responses to Shoot this messenger

  1. W Hogg

    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.

  2. None

    I can assure you as a woman that there certainly is a girls club and it’s more vicious and nasty than any boys club. There are also gay clubs, lesbian clubs ( these two mostly in public sector organisations), Asian clubs all sorts of cliques in corporatopia depending on the industry. There is no such thing as merit as it’s always the case of who you know, not what you know and what your track record is. Women can make good managers but they’re usually hopeless CEOs , entrepreneurs, strategists, board directors.

  3. Curmudgeon

    This is another example of confusion between equality of opportunity and equality of outcome. In simple terms, the Left favours the latter, and the Right the former. The Australian Graduate School of Management started offering MBA degrees in 1977 and I would doubt that gender has ever been an entrance qualification. Since then, business degrees have grown exponentially. Some 40 years later, there has to be a deeper explanation for the absence of quality female directors than male chauvinism.

  4. Behind Enemy Lines

    Not every unpleasant statement is untrue, and not every assertion requires an elaborate academic analysis to test it. Plain Anglo-Saxon common sense will often suffice.

    For example, when recruitment’s governed by quotas (whether formal or not), you are necessarily going to hire less-qualified people. Not every time, but it’ll happen all the same. That is the purpose of quotas.

    And when people are overcommitted, you are necessarily going to get worse results from them. Not every time, but it’ll happen all the same. That’s the essence of ‘over’-commitment.

    What Samuel pointed out (dinosaur or not) is self-obvious. Because when you slot someone into a job because of her sex, and then allow her to take on more paid roles than any one person can realistically hope to satisfactorily do, then on balance you’re going to get worse results and screw your shareholders.

    This is the exact sort of observation that’s been made for decades about a tiny pool of clubmen hogging public company directorships. With justice.

    Riddle me this: why is it suddenly contentious?

  5. stackja

    Which companies succeed and which don’t? What gender is most successful? Does it matter?
    Profit should be the only the criteria.

  6. Bruce of Newcastle

    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.

    He has a point. The biology of women favours the group, and women are naturally risk adverse for the same reason. But the success of a company depends upon risk taking and seeking an edge over the competition. Groupthink, on the other hand, is deadly in a board.

    Therefore if you recruit directors on the basis of their sex you will also acquire their genetic baggage.

    I know of no female explorers from the Exploration Age. Doing that job is so far outside the biological envelope of the female of the species that none ever became an explorer. That I know of anyway. No female Dampiers, Stuarts, Vasco Da Gamas or Cooks.

    Companies need explorers to survive.

  7. Bugger it, my 2nd try at posting a comment is in moderation. I give up.

  8. Robber Baron

    Best we don’t play their game. It leads to failure. Samuel is sorry for being a truth teller.

    In my own business I don’t hire based on quotas. I only hire on merit, and fire on bad performance. I can’t afford to run a business where profit and customer satisfaction are not the primary drivers.

    Quotas only work where the is no accountability, no competition, no customer satisfaction and no profit requirement.

  9. RobK

    As in the comments above; quotas are a non issue.

  10. Rockdoctor

    Now I don’t agree that this could institutionalise female mediocrity – that is an empirical question and more below on that.

    I disagree with you Sinc on this one sorry. I have seen it starting to happen already in mid levels of management in Mining in some companies. Any quota system is flawed and a path to mediocrity.

  11. Dr Fred Lenin

    “My toilet is blocked and overflowing” “you must get a female plumber” “well send one “ “we havent got one “ “but I need a plumber now” “Then you must get a female , its the quota law” , “where do I get one? “ “we dont have any “
    Discrimination is against the law ,but positive discrimination is legal , because although its discriminatio its not discrimination . (Did I Ruddify that statement well enough? Ruddification can be dificult .

  12. MPH

    The statistics are quite clear – people in general prefer to work for a man than a woman, having previously worked for a woman increases the preference for a male manager in future, and no one dislikes the prospect of a female manager as much as a woman who has previously worked for a woman. It is hard to get to the to without some kind of support from peers and employees.

  13. Petros

    Sorry to say Prof but I think you need to mingle outside of the Melbourne academia circles. A small group of female directors, not all, promoted way beyond their competency. Got a mate in aviation suffering under this very problem. And yes there are lousy male ones, too.

  14. Pyrmonter

    @ Sinc

    Samuel might or might be a dinosaur; I cannot however remember him ever saying anything quite as foolish as Rod Sims’s remark of last week. (The same can’t be said for Samuel’s predecessor, Alan Fels)

  15. Done Deal

    Call them clubs, cliques, tribes, clans, cultures, groups, factions, coteries, elites, circles, gangs. They exist in every aspect of human existence. In any area of endeavour who you know is often just as important as what you know or can do. Cosy little groups of mutual back-scratchers who are not a threat to each other tend to gravitate together (particularly in the public sector). The level of competency within groups can vary from mediocre to superior. Don’t really know too much about female directors and their general levels of competence but I would be surprised if overall they exhibited any different characteristics as a group than any other. I don’t see this grouping instinct of humans to disappear any time soon.

  16. Davey Boy

    Preserving heritage and culture, maintaining cherished and time-honoured traditions and practices
    Vs.
    Being a dinosaur, clinging on to old and irrelevant views and ways, stuck in the past

    Depends which “side” (gender, age, skin colour) you’re on, I suppose.

  17. Texas Jack

    Thirty-two years in private enterprise and I have never once been in a recruitment meeting where a very common male-only leadership group discussed how to exclude female applicants from a single role, whereas I have attended many where the lack of interested female candidates was lamented. Anyone see it different?

    Tun to 2019 and it’s clear there has been a quiet affirmative action campaign run in our major firms to the obvious detriment of middle aged male general manager candidates who’ve had to compete with less well qualified candidates of a certain gender who’ve been delivered often unwarranted seniority. If affirmative action policies of a major company were proven would it not be grounds for a class action?

  18. No su for you!

    @ Curmudgeon

    Some 40 years later, there has to be a deeper explanation for the absence of quality female directors than male chauvinism.

    There is; female humans have been selecting for those traits for a good 100k years or more; male humans have not. All of the quotas are fighting 500 generations of grandmother’s decisions. Can’t tell progressives that though.

  19. BorisG

    Not every unpleasant statement is untrue, and not every assertion requires an elaborate academic analysis to test it. Plain Anglo-Saxon common sense will often suffice.

    I agree with your analysis. Yet if samuels expressed this in your terms, it would have been very hard to refute. Instead he chose provocative rhetoric destined to stir an outrage, with a result opposite to what he intended. I leave it to other commenters to judge whether this was wise. If he simply said that reverse discrimination leads to reduced quality of directors and that affirmative action almost always means reverse discrimination, that would be still controversial but at least defendable. And true.

  20. J.H.

    I think he is right. Their record is a litany of corporate cronyism and failure…. and the record of women in Government is even worse, bar Margret Thatcher.

    They are just attracted to Socialism…. Seems to be a default setting with many women.

  21. wal1957

    Any quota system is bound to lead to a certain level of mediocrity.
    People should be hired on their merits. This is common sense is it not?

  22. Behind Enemy Lines

    BorisG
    #2974999, posted on March 30, 2019 at 10:49 pm
    . . . if samuels expressed this in your terms, it would have been very hard to refute. Instead he chose provocative rhetoric destined to stir an outrage, with a result opposite to what he intended. I leave it to other commenters to judge whether this was wise.

    Fair point. He was certainly offering himself up as a lightning rod.

    And yet, I don’t see any way he could’ve said what he meant, and avoid being pilloried for it. We’re simply not allowed to say it, or imply it, or notice it.

  23. John A

    I disagree with this paragraph – Samuel is a dinosaur. As former competition czar, he is 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.

    An argument from anachronism is still a logical fallacy. You are on better ground arguing that his thinking is incorrect and his own logic fails.

    So half of this thread is wasted on the dinosaur epithet.

  24. sdfc

    reverse discrimination

    A fluffy, made up term. There is only discrimination.

  25. BorisG

    Sinc, if you are still reading comments, this thread is a microcosm of what Cat has become. Your post wa about Samuelson suggestion (poorly worded) that reverse discrimination leads to poor outcomes. Yet the thread has become dominated by those who think not only discrimation in favor of women is wrong but that women are bad in those corporate roles.

    That is freedom of speech for you. Unfortunately freedom of speech means very low signal to noise ratio.

    freedom of speech on a private blog means equality of outcomes.

    I think alt right need their own blog.

  26. Sinclair Davidson

    That is freedom of speech for you. Unfortunately freedom of speech means very low signal to noise ratio.

    Yes. I know.

    The thing is that we also have a lot of lurkers. They can learn something from the posts if not the threadsters.

  27. BorisG
    #2975067, posted on March 31, 2019 at 12:11 am

    That is freedom of speech for you. Unfortunately freedom of speech means very low signal to noise ratio.

    Oh really? And who decides what’s signal and what’s noise; you?
    I happen to think your contributions are nothing but noise. Now what?
    Anyone who posts a comment with the sentence “Unfortunately freedom of speech means yada yada yada pull mself dry etc” is doing nothing but creating noise….in my humble noise making opinion.

    If you believe you are the one in 25 million Australians who KNOWS what’s a signal and what’s a noise….then you’re the noise.

    Sinclair Davidson
    #2975071, posted on March 31, 2019 at 12:15 am

    Yes. I know.

    There you go.
    The only redemption for the “perfesser” is that he owns the bog, therefore he has every right to decide what’s signal and what’s noise.
    But you BorisG….. you are just another dickhead like the rest of us. You don’t get to make the comment you did without the rest of us calling you out for being the fvcwit that you are.

    p.s. It would be nice to know why my comment went into the ether. Perfesser?

  28. Sinclair Davidson

    p.s. It would be nice to know why my comment went into the ether. Perfesser?

    No idea. There are no comments in moderation at the moment. So if it hasn’t appeared its gone forever.

  29. JohnL

    There is a shortage of bricklayers!!!!!

  30. Buccaneer

    Regardless of the validity or otherwise of Samuel’s comments, there is simply no circumstance where discrimination can be defeated by changing who is the beneficiary of discrimination. A quota system for any group is naked discrimination and should be called as such. A group of elitists, like those at board level, will always create suspicion among those excluded from the group, it concerns me more that they don’t seem to be able to see the optics from the perspective of those outside their group. Pandering to identity politics will end in tears for them all and we will all suffer the blowback.

  31. Rebecca McGrath was appointed to the OZ Minerals board in Nov 2010 and appointed Chair in Mar 2017.
    During the almost ten years of her Board tenure the share price for this company has not changed.
    As an investor that is considered failure.
    It is a also reasonable barometer as to her – and the rest of the Board’s – competency in their respective roles.
    As Chair she must accept direct responsibility for OZL’s pathetic performance.
    Yet here she is criticising what Graeme Samuel says about what those of us who work in this rareified atmosphere know is rampant.
    The gene pool of qualified directors in Australian public companies is shallow enough without pretending preferential treatment is not being given to under qualified females to ensure the diversity boxes are ticked.
    Anyone been to an AICD seminar lately? Doesn’t matter what the topic the gender narrative is always front and centre of every discussion.
    Maybe someone in the MSM should plot the share prices of those companies with women in executive and Chair positions? Too scared?
    The market is seldom wrong about board performance metrics being reflected in the share price.

  32. Behind Enemy Lines

    Major Elvis Newton
    #2975357, posted on March 31, 2019 at 10:39 am
    Anyone been to an AICD seminar lately? Doesn’t matter what the topic the gender narrative is always front and centre of every discussion.

    It’s true, all of what you said above. I let my membership lapse after AICD started diverting member funds to advance women’s interests at the expense of the blokes and company shareholders. I still see what’s going on because an old colleague is running one of the State branches. The endless gag-worthy PC content is pretty disgraceful. But predictable. Because this is what naturally happens when the entryists are allowed to burrow into an institution and carry on with their long march.

  33. JohnL
    #2975156, posted on March 31, 2019 at 6:36 am

    There is a shortage of bricklayers!!!!!

    Yet the quantity of training is regulated to the point of under-supply.

  34. vr

    Sinclair — The paper on Australian female directors hasl already been written. The market reaction to their appointment is not significantly different from zero though the sample is extremely small.

  35. vr

    Sinclair — The paper on the appointment of female directors to boards of Australian firms has already been written. No significant market reaction, though the sample is super tiny.

  36. BorisG

    And who decides what’s signal and what’s noise; you?

    The owner of the blog. That is why I appealed to him. Nothing controversial about it.

  37. Malcolm Thomas

    Female favouritism is rife in my workplace and, yes, while there are some very good female senior managers, we also have plenty who are less capable than the men they have
    crowded out. This is not only inequitable but inefficient, and is what happens when the poltics of equality of outcomes displaces the priniple of equal opportunity – essentially, someone’s trade unionism in action.

  38. BorisG
    #2975067, posted on March 31, 2019 at 12:11 am

    That is freedom of speech for you. Unfortunately freedom of speech means very low signal to noise ratio.

    That was your statement right?

    And who decides what’s signal and what’s noise; you?

    The owner of the blog. That is why I appealed to him. Nothing controversial about it.

    You’ve already decided freedom of speech means low signal to noise ratio, now you’re punting it to the Perfesser. Don’t be a coward, own your own statement.

    The only redemption for the “perfesser” is that he owns the bog, therefore he has every right to decide what’s signal and what’s noise.

    That was my statement. So you’re not telling me anything new. You’re just backing away from your own claim.

  39. Ƶĩppʯ (ȊꞪꞨV)

    reverse discrimination

    not possible to achieve a mediocracy without it

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