The Institute of Economic Affairs has just posted an excellent article by Michael Klein relating to the latest Corporate Social Responsibility (‘CSR’) strategy of the European Commission, and how CSR is used to force the Commission’s left-wing ideologies upon the business sector, with damaging results. The article:
I reported in a recent post about an article published recently by The Commentator, ‘Socialism’s Trojan Horse: “improved” gender diversity in the boardroom’:
I’m pleased to report the article has been well received, and the comments well-considered and interesting. In the course of replying to one person’s comments I invited her to provide me with evidence of the oft-claimed positive causal link between ‘improved’ gender diversity in the boardroom and enhanced corporate performance, which remains a ‘missing link’. Another lady replied to my request for evidence and cited two studies, one about American firms, the other about Danish firms. The reports are very technical in parts so I invited Michael Klein, the renowned commentator on the content of research papers, to review them. He kindly agreed to do so, and the remainder of this post is his commentary. My thanks to Michael for this.
STUDY ON AMERICAN FIRMS
‘The diversity of corporate board committees and financial performance’ (Carter et al.)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1106698
There are some oddities in table 3 which aren’t addressed in the text, so far as I can tell. Though Table 3 shows that the share of women on boards had a positive effect on performance (Tobin’s q) it doesn’t show an effect of Tobin’s q on share of women in boards, which one could interpret as evidence against the assumption that it is mostly well-performing firms which add women to their boards. However, the oddity is the variable ‘Additional directorships’ which shows in Equation 1 a coefficient of -.242 and in Equation 2 a coefficient of 1.387. This means that holding more than one directorship had a moderate and negative effect on firm performance, but it had a strong and positive effect on the share of women on boards.
I would interpret this result as indicating that the authors had a great number of women in their dataset who held not one but several directorships. Hence, they didn’t measure the effect of diversity, because to measure diversity you’d need different women, but of sameness, because the same women who held several directorships were measured time and time again… Given that boards include 11.4% women, I would consider this one a result-wrecker.
Furthermore, total assets made a negative contribution to Tobin’s q, but a positive one to women’s share in boardrooms, hence, it was asset wealth which explained board composition to a larger degree than financial performance and it was firms with lower assets which explained higher profits to a greater degree than women’s share on boards (equation 1). And, last but not least, it wasn’t women’s share on boards which had a positive effect in Tobin’s q (financial performance), but women’s share on boards of firms in service industries (Variable D8, Table 3), and particularly not on boards in mining industries (D2) and retail (D7). Again, the authors read more into their results than there is to be found, and again I would think that the conclusion they draw isn’t backed up by data. I’m not surprised that this paper didn’t mature into a contribution to a scientific journal. I guess it would have had a number of problems getting over the peer-review-hurdle….
STUDY ON DANISH FIRMS
‘Do Women in top management affect firm performance? A panel study of 2,500 Danish Firms’ (Smith et al.)
http://www.emeraldinsight.com/journals.htm?articleid=1572898&show=abstract
Overall assessment: It’s awful!
(1) the 2,500 firms examined in the paper included 46 with a female CEO in 1993 and 99 in 2001.
(2) the authors label their variables (e.g. in Table III) consistently Board Top CEOs 1993-2001 implying panel data, but they have only a follow-up with two time points, hardly what the label ‘panel’ would lead us to expect.
(3) Again Table III shows a correlation-coefficient of 0.063 (5% significance level) between having a female CEO and gross profits. That is rather minuscule and given that only 46/99 firms had a female CEO I wouldn’t be surprised if this is a statistical artefact. I can, however, say nothing about it, because information about the quality of the model, usually included in tables (and as a matter of scientific rigour required) is not provided.
(4) Table VII displays coefficients of an Ordinary Least Square Regression (‘OLSR’) – as does Table III – and shows higher education of CEO to be highly correlated with Gross profit, beta= .283. Now, why have the authors not included higher education in Table III, as a control? Guess why? Because the effect between female CEO and Gross profit would vanish into thin air, leaving only higher education. I will eat my Tottenham Hotspur cap if this is not what happens when you calculate an OLSR with female CEO and higher education both independent variables to explain gross profit.
(5) By the way, gross profit is hardly a good measure of financial performance, it depends on too many exogenous variables beyond the control of CEOs. At least, it would have been necessary to adjust gross profits to industry means… Anyway, this study proves that education matters, it doesn’t prove that female CEOs or female share in boardrooms have a positive effect on firm performance.
(6) Just to repeat myself: Why is it that female composition is expected to influence financial performance? What is the theory behind the claim? Ask Smith, Smith and Vernier and you will draw a complete blank.
Louise Mensch, 41, became a Conservative MP in 2010 after being an ‘A-lister’ and selected from an all-women prospective parliamentary candidate shortlist. A fine example of the social engineering of which David Cameron is so fond. Only six months ago Mensch complained in a magazine interview of not being promoted to a senior position, but a week ago announced she was giving up politics after just two years to live with her rich American husband, and her children from an earlier marriage, in New York. The result of all this is expected to be a by-election defeat for the Conservatives. Nice one, Dave.
Voice of Russia asked me in again for a recorded discussion, this time about women’s choices with respect to work and home life. In the studio with me was Lynne Burnham, Secretary of ‘Mothers at Home Matter’. The link to the discussion:
I’m a big fan of The Commentator, which on its website says it aims to publish:
1) Select news of the type that is often missed or downplayed by other media outlets;
2) Original commentary, primarily offering fresh perspectives on issues of civilisational importance.
What could be of more civilisational importance than the ‘gender balance in the boardroom’ social engineering initiative? So I’m pleased to say The Commentator has just published the following:
The University of Michigan (and more specifically its Ross School of Business) was the source of a paper that continues to generate much interest in the ‘gender balance in the boardroom’ debate. Proponents of ‘improved’ gender diversity in boardrooms have long claimed a positive causal relationship between increasing female representation on boards and increasing corporate performance. A paper published by Professor Amy Dittmar and Professor Ken Ahern of the UoM Ross School of Business shows conclusively that in Norway the increased female representation on company boards (forced by legislation) had a causal effect on corporate performance, but the effect was a NEGATIVE one. Still, I don’t expect that proponents of ‘improved’ gender diversity will trouble themselves over such facts (they rarely do). For the umpteenth time I invite anyone with any evidence of a positive causal link between increased female representation on boards, and enhanced corporate performance, to send it to me. I’ve been searching for the evidence for years, and nobody seems able to provide any. We all know why, don’t we?
Many Norwegian companies delisted rather than expose themselves to the quota legislation, and not even one company has since relisted.
The report’s full Abstract:
In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.
The report is now in print in The Quarterly Journal of Economics, 2012, vol. 127(1): 137-197. You can also access the article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364470
Visitors to the blog of the Anti-Feminism League http://fightingfeminism.wordpress.com may recall that in March 2012 the writer, broadcaster and Daily Mail columnist Quentin Letts gave the League some welcome exposure:
http://fightingfeminism.wordpress.com/2012/03/17/the-estimable-quentin-letts/
I’m delighted to report that Mr Letts has given exposure to the Campaign for Merit in Business in his Mail column today:
The Harriet Harman-ite push for more women on company boards has suffered a setback – thanks, oh dear, to a member of the sisterhood. One of the main arguments heard in favour is that companies with female directors will make bigger profits.
However, Cranfield University’s Professor Susan Vinnicombe, appearing at a House of Lords inquiry into the idea, has now torpedoed that theory. ‘It does not make sense,’ she stated.
The Campaign for Merit in Business, which opposes feminist tokenism, is cock-a-hoop. But will Prof Vinnicombe’s admission stop Business Secretary Vince Cable interfering with the independence of firms that appoint directors on ability rather than gender?
A link to the column:
http://www.dailymail.co.uk/debate/article-2183326/Cripes-A-Tory-Borises-Boris.html
I’ve long been a big fan of Wikipedia, and refer to it almost every day. So I was interested to learn that Michael Klein and a German journalist, Arne Hoffmann, have co-authored an open letter about German Wikipedia to the founder of Wikipedia, Jimmy Wales:
They invite people who support the letter to write to them at science-watch@hotmail.co.uk, and I’ve just submitted the following:
Michael, thank you for raising this important issue, and I look forward to seeing how Wikipedia respond. I would add that the same problem is apparent at times in the English language version. For example, the Wikipedia entry on ‘antifeminism’ has the following statement under ‘Definitions’:
Michael Kimmel, a men’s studies scholar, defines antifeminism as “the opposition to women’s equality.” He says that antifeminists oppose “women’s entry into the public sphere, the reorganization of the private sphere, women’s control of their bodies, and women’s rights generally.” This, he says, is justified by antifeminists through “recourse to religious and cultural norms, and sometimes … in the name of ‘saving’ masculinity from pollution and invasion.” He argues that antifeminists consider the “traditional gender division of labor as natural and inevitable, perhaps also divinely sanctioned.”
Kimmel’s definitions of anti-feminism aren’t held by any anti-feminists of my acquaintance, and I believe they misrepresent the positions of the majority of anti-feminist activists and writers. We don’t oppose women’s equality. We oppose the relentless special treatment of women and girls in general, and feminists in particular, which is proving highly damaging in many ways, gravely affecting the family, marriage, government, business, media, academia, and much more besides.
I refer you again to the recent submissions of written evidence to the House of Lords sub-committee:
120726 House of Lords sub-committee, written evidence submitted
If you consider all the submissions, you’ll see that virtually all fall cleanly into one of three camps with respect to quotas designed to ‘improve’ gender balance in the boardroom:
ANTI QUOTAS
This is the position of Campaign for Merit in Business, because it seems to us that such quotas are unmeritocratic, their ideological foundation being left-wing and by definition counter to the legitimate interests of private business, and therefore discouraging wealth creation. Our submission is on pp 47-49, while other contributions in a similar vein are put by Michael Klein (pp 106-111) and Raymond Russell (p 155).
PRO QUOTAS
This is (predictably) the position of The Fawcett Society as well as others. The Fawcett Society has frequently been exposed as being cavalier in its use and manipulation of data in business-related areas, for example in its statements on the ‘gender pay gap’. We shouldn’t be too surprised then by their inferring causation from the McKinsey and Catalyst studies and reports, when all they show is correlation (if even that). Anyone familiar with The Fawcett Society will be only too aware it’s a misandrous organisation dedicated to relentlessly advantaging women and girls in general (and militant feminists in particular) at the expense of men and boys, so the nonsense they’ve submitted to the House of Lords committee (pp 67-73) is at least consistent with their ideology.
ANTI QUOTAS BUT PRO QUOTA THREATS
This position is adopted by the 30% club among others to encourage companies to add more women to their boards ‘voluntarily’. It’s the government’s official position, stated regularly by both the prime minister and Vince Cable, the business secretary. In our view, this position is utterly indefensible. If quotas are wrong, how can the threat of them be right? It’s the same position taken by the mugger who, when addressing his victim, says, ‘I’m against physical violence, but I’m prepared to use it if you don’t hand over your money voluntarily’.
The submission of the 30% club (pp 173-8) has some figures for the proportion of newly appointed non-executive directors who are female:
2010: 13%
2011: 30%
2012 (March to date): 44%
Could it be any clearer? FTSE100 companies are taking on token women in the least risky manner possible – as non-executive directors – in direct response to the threat of quotas. Organisations including the 30% club applaud the increase in numbers, and infer these women are being appointed on the grounds of merit, when most of them are clearly not.
With the London Olympics officially starting today, let me offer a sporting analogy. Let’s include women in the 100 metre men’s event, but with a 25 metre start over the male sprinters, accepted by the men on the grounds that otherwise they’d have 3 seconds added to their times. Would that be a triumph for female athletes? No. And nor is the increase in the number of female directors under the threat of quotas.
Finally, permit me to make a prediction. The business sector will start fighting back against this ideologically-inspired initiative, and soon.
Have a good weekend.
Regular visitors to this blog will be aware of the House of Lords inquiry. Herewith the latest update:
Written submissions to the enquiry were published this afternoon:
120726 House of Lords sub-committee, written evidence submitted
Most of the written evidence is from the usual suspects, many of them professionally committed to ‘improving’ gender balance in the boardroom. Many of them refer to now discredited reports and ‘evidence’, and overall we have an example of ‘groupthink’ that takes some beating. Which is ironic, given that one of the arguments for more women on boards is to reduce groupthink… We’ve been in touch with most of these groups, and none has offered a shred of evidence of a positive causal relationship between more women on boards and enhanced corporate performance. Indeed, organisations and individuals with some integrity are publicly distancing themselves from the ridiculous claim.
There are submissions, however, offering a different perspective:
Campaign for Merit in Business: pages 47-49
Michael Klein: pages 106-111
Ray Russell: page 155
I urge you to subscribe to email notifications to make you aware of new comments on the IEA blog piece:
http://www.iea.org.uk/blog/the-gender-diversity-delusion
After the comments from ‘Female entrepreneur’, I honestly didn’t expect any further comments from militant feminists. So I was surprised – and delighted – to be notified of the following yesterday:
Submitted by Anonymous (man loving) female on Mon, 23/07/2012 – 11:52.
I’m a headhunter – I work with FTSE 100 & 250 Chairmen and Chief Execs to hire Executive Directors and Non Executive Directors to boards and operating committees, and sometimes below that as well. I have worked in this field for years and have never heard of Mike Buchanan before stumbling across him on LinkedIn the other day. I didn’t bother reading much of his material; only because it quite quickly became a ranting, somewhat bitter echo of itself – saying the same things over and over about lack of causal evidence linking gender diversity and better company performance etc. This is a common means of throwing out the baby with the bathwater; of discrediting and derailing the entire common sense agenda of having more diverse boards because of a lack of empirical evidence to back up one claim. True, this claim of achieved empiricism in linking better company performance with having more women on boards was premature and poorly made by those authoring the reports, and in citation by the government. And I also understand that a focus on gender in isolation isn’t ideal and can be quite annoying (diversity has a much broader definition – diversity means “capable of various forms”), but you have to start somewhere, you have to pull the issue apart and focus on more manageable strands unfortunately, as otherwise its a beast which is too big to wrestle with – hey ho, again, get over it. I wish it wasn’t this way, but it is. (What about the need for boards to represent the geographical diversity they serve, for example. I have been engaged to do just that for one financial services organisation.) So get over the slightly irritating focus on women (which most senior women I meet do find somewhat irritating), and get over the (again, irritating) error in linking their presence to proven performance benefits – there’s a much broader, more fundamental issue at play here which has support from nearly all business leaders – making sure those in power – in business or politics – adequately understand, reflect and respond to the socio-cultural changes our world has undergone and is undergoing. Otherwise they become irrelevant; they will fail to bring a range of views to bear to create healthy discourse and challenge in decision making, and our businesses and governments will fail. With women making 80% of purchasing decisions in households, and accounting for OVER 50% of all graduates in this country, how can we truly claim to have the broadest and therefore strongest leadership base with only 12.5% non-male board directors in the FTSE 350? (% figure as per the time of writing Lord Davies report in February 2011). Diversity is not about applying misplaced, pappy, neo-liberal notions of fairness to the boardroom. It’s sad and a bit worrying that some apparently intelligent men of today persist in confusing the current agenda with this (most women hate this notion too) and react in this kind of threatened and defensive way (judging by Mike’s ranting). If this were so, the Chairmen and CEOs with whom I work would not tolerate government intervention of ANY kind. They would themselves rise up against it (thought I doubt they would choose images of bullish schoolgirls looking for a fight, or Halloween masks of female zombies for their book or report covers..,. I mean, what?!?!). I have sent a few links to a few FTSE 100 Chairmen and they are horrified that such commentators dare to speak on their behalf: “People such as this take us [business leaders] for fools on this topic – our jobs are to run sustainable businesses which are designed to capitalise on change rather than suffer from it. PLC company boards must evolve faster than they have done, to include more people who don’t look, sound and think the same – our world in which we operate has changed and so must we.” What’s more, intelligent leaders of today, whether male or female, will understand that our society in the West is in transition when it comes to gender under the premise “sex is biological; gender is cultural”. Gender identity concerns individuals’ perception of themselves as and identification with being female or male. A gender role is the set of societal expectations that dictates how an individual of a gender should behave, think, and feel. During the past century, perception of all three aspects of gender have changed, particularly that of gender roles. Both men and women and re-navigating our sense of what the gender roles mean collectively and indivually in 21st century, especially in relation to work. This learning process involves understanding how women are held back and hold themselves back in business because of the legacy left by millennia of patriarchy. This has implications for companies wanting to retain a more diverse talent base through to leadership levels. I myself was brought up by parents who thought their daughters should have more responsibility in the house and with the family than the sons, and I have developed feelings of guilt when choosing a career over a home-based life partly because of this type of treatment. But at school I was made aware of it, and at work I was told to challenge any unconscious or conscious judgement made of me in this sense. I have and I do succeed in doing this, but it does add an extra dimension to my working life that I imagine most men would be unaware of, unless told, or perhaps unless they see their daughters experience it. This is subtle stuff which is not a women’s issue but a societal one. As a CEO recently wrote to me:”Getting a more balanced board does require a shift in mindset that the boys are less inclined to make because they don’t come face-to-face with why we need it. The shift involves acknowledging subtle cultural schemas with regard to gender roles, which have and do hold women back at work (many holding themselves back according to what they think is required of their roles), leading many to choose other paths when we need more of them to stay in business!”. I read in one of Mikes rants that women make choices to stay or leave work, and that we should stop making allowances or advantaging’ them therefore – he’s right, but we must look at the broader cultural foundations we have built which encourage these choices, and figure out if and how we want things to be different. Seems like you guys need to accept that most of the world wants a different basis for making choices, even of those choices are the same…. The simple assumption that women “opt out” of the workforce promotes the belief that individuals are in control of their fates and are unconstrained by the environment. This is very, very silly.
Submitted by Mike Buchanan on Mon, 23/07/2012 – 15:48.
Thank you for your contribution to this debate. A few thoughts:1. You accuse me at several points of ‘ranting’. I invite you to point to even a single example of this. You’re using a shaming tactic, which only serves to harm your credibility.2. We’ve already had one contributor (Female entrepreneur’) who lacked credibility from the outset by not revealing her identity. To be fair, she then proceeded to destroy any credibility she might have had by her comments. People who’ve read her comments are united in the belief that she cannot possibly be a prominent entrepreneur (most doubt she’s even an entrepreneur at all). So why not reveal your own identity? If you truly work with FTSE100 and FTSE250 Chief Executives and Chairmen, why would you want to hide your identity? Until you reveal it, excuse me for doubting that you work in the role you claim.3. I invite you also to reveal the identity of the Chief Executive who wrote the letter you claim to have been sent. Do ask him / her first, obviously.4. Running throughout your entire comment is a militant feminist thread. I refer readers to such lines as, ‘Women are held back… by millennia of patriarchy’. Can we assume, therefore, that the term ‘man loving’ in your blog name is ironic?5. You seem to be denying that men and women willingly make different choices with regards to work. In fact, the evidence that they do so is very robust – Dr Catherine Hakim’s Preference Theory comes inevitably to mind – and I shall be presenting some of it at my presentation at the IEA. I invite you to attend the event and engage in a calm, rational debate on the topic of gender balance in the boardroom, for which your professional role clearly qualifies you. To the best of my knowledge, it will be the first example of such a debate anywhere in the world. It is, to put in mildly, long overdue.6. I’m aware of only two studies showing a CAUSAL link between increased representation of women on boards and corporate financial performance, and both show a NEGATIVE link. Theyre the studies cited in my IEA piece. If you’re aware of even one study showing a positive causal link, would you be so good as to share it with the world by referring to it on this blog? And if you cannot do so, are you of the view that damaging companies’ financial performance is a worthwhile price to pay for increasing the number of women on boards?7. You might be interested in a recent admission by a leading proponent for more women in the boardroom:Have a nice day.Mike BuchananCAMPAIGN FOR MERIT IN BUSINESS
Submitted by Doris on Mon, 23/07/2012 – 15:54.
I have followed this blog and read with interest the diverse comments made and can find no “ranting” only objective views from a variety of individuals with one notable exception, the “Female entrepreneur” whose views clearly have no basis in intellectual or scientific argument. The platform given by the IEA for this subject would not be allowed if it was for an individual/s to just rant as they have significantly higher standards than that however they do want robust debate from both sides of the argument. Mr Buchanan, like so many other commentators on this subject, is systematically shamed and put down for his views which in a democracy is disgraceful. His detractors should however openly challenge him and the many other men and women who share his views to a public debate where infantile playground shaming tactics are definitely put to one side.
Campaign for Merit in Business 
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