The endless search for the missing link continues…

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.


‘The diversity of corporate board committees and financial performance’ (Carter et al.)

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….


‘Do Women in top management affect firm performance? A panel study of 2,500 Danish Firms’ (Smith et al.)

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.

University of Michigan study on the impact of quotas on Norwegian businesses

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

We need to talk about Vince Cable… again

The Business Secretary continues to talk and write utter nonsense on the topic of gender diversity in the boardroom. Only Lord Davies compares with him as a bullying male proponent of the initiative. On 16 July the Evening Standard published an article by Cable which plumbed new depths, ‘City passivity and prejudice is still sidelining women’. I had to reply:

120721 open letter mailed to Vince Cable

Professor Susan Vinnicombe, the world’s leading academic proponent of ‘more women on boards’, makes a remarkable admission to a House of Lords inquiry

Regular readers of this blog will need no introduction to two of the leading British proponents of ‘improved’ gender diversity in boardrooms, Professor Susan Vinnicombe and Dr Ruth Sealy, respectively Director and Deputy Director of the Cranfield International Centre for Women Leaders (‘CICWL’). Professor Vinnicombe founded CICWL in 1999, and it wouldn’t be an exaggeration to say that these indefatigable ladies are leading lights in their movement globally. Who better, then, to stop the Campaign for Merit in Business in its tracks, by providing evidence for the long-claimed yet elusive causal link between ‘improved’ gender diversity in the boardroom, and enhanced corporate performance? Sadly, they have yet to provide such evidence to us. The reason has just become clear, and it is with particular interest that we have read the minutes of last Monday’s House of Lords sub-committee meeting on ‘Women on Boards’:

120716 House of Lords sub-committee meeting minutes

Much of the content will come as no surprise to people who follow this topic closely, and we may post a detailed critique of the report in the coming days. It seems to us from the minutes of the committee’s meetings that all 11 peers (three of them Conservatives) are supporters of ‘improved’ gender diversity in boardrooms, and all the witnesses questioned have been likewise. Indeed, many of the latter have been professional proponents of ‘improved’ gender diversity. Not a single dissenting voice has been heard. If this is democracy, I’m an aubergine. I’m reminded of the December 2010 CBI report, ‘Room at the Top’, whose 14 co-signatories included 9 women, along with five men who were already on record as being supporters of ‘improved’ gender diversity on boards.

The most interesting section of the minutes is possibly that between pages 4-7, questions 199-201. For the time being we’d just like to bring to your attention Professor Vinnicombe’s response to a question put by Lord Fearn, which I’ve reproduced below. I’ve indented the key sentences. Our thanks to Professor Vinnicombe for her integrity in making these statements. We can only hope that others (Vince Cable and Lord Davies come to mind) start to display more honesty in this area. But let’s not hold our breath, because they’d be admitting what we have long known – there is no financial case for improving gender diversity in the boardroom. And without a financial case, what is left? Nothing more than left-wing conspiracy theories, fantasies, lies, delusions and myths.

Lord Fearn: Is there a strong business case for improving the gender diversity of boards? If so, does it follow that there is also a strong business case for increased gender diversity on boards across the EU?

Professor Susan Vinnicombe: Yes. We believe that there is a very strong, compelling and comprehensive business case for gender diversity on boards, and it is a case which stands not only in the UK but across the EU and indeed globally. It sits on several broad platforms.

One is talent management. In all the developing countries of the world, 60% of the graduates are now women. We have a tremendous number of women coming in at graduate level to our big corporates. So the fact that we are seeing so few women at the top on our corporate boards is a sheer waste of talent. Talent management would be our first point concerning the business case.

Secondly, if corporates are to serve their markets well, it just makes sense that they need to be able to represent those markets. In many of the markets, women are the consumers, so it makes very good business sense to have women on the corporate boards of those companies.

Thirdly, there has been quite a push in the past – indeed, we ourselves have engaged in such research – to look at the relationship between having women on corporate boards and financial performance. We do not subscribe to this research. We have shared it with chairmen and they do not think that it makes sense. We agree that it does not make sense. You cannot correlate two or three women on a massive corporate board with a return on investment, return on equity, turnover or profits. We have dropped such research in the past five years and I am pleased to say that Catalyst, which claims to have done a ground-breaking study on this in the US, officially dropped this line of argument last September.

However, there are broader, non-financial performance indicators, such as corporate social responsibility, employee involvement, innovation, philanthropy and good communications, which have been seen to be connected to companies that have women on their boards.

Dr Catherine Hakim’s Preference Theory

I recently met with an eminent Business Studies professor who agreed with my general analysis about ‘women in the boardroom’, but believed that because of demographic changes in recent years – namely the flood of women into business-related courses, such as accounting – the ‘problem’ of board gender ‘imbalance’ would disappear within 10-20 years. I disagreed, citing Dr Catherine Hakim’s Preference Theory, which shows that only 10% to 30% of women are work-centred. Dr Hakim first published this theory in an Oxford University Press book in 2000 when she was a Senior Research Fellow at London School of Economics. He was intrigued by the theory, but suggested the % of work-centred women would have risen dramatically since 2000. I doubted this analysis, but said I would contact Dr Hakim on the matter. She kindly sent the PDF at the end of this piece, and commented as follows:

Regarding your anonymous professor, you can give him the attached three-page synopsis of preference theory. The ‘trends’ and ‘critical mass’ arguments do not apply in medicine, where women are already over half of all entrants to medical schools. The BMA recently expressed concern about this, saying that because women choose part-time work etc., and do not put in the same time and effort into bargaining and trade union activities, so the relative pay and standing of doctors would decline slowly but surely. In Russia, where the majority of physicians are female, the pay and status of doctors is far lower than in the west. So I do not see these female accountants as breaking the ‘glass ceiling’ to push their way into the boardroom.
Even in Sweden, where ‘gender equality’ has ruled for decades, only one-third of women work full-time continuously in the same way as men – see Table 3 in the attached file summarising preference theory. Most men assume that once women start professional and managerial careers, they will behave exactly like men. In reality, research shows that even the most highly educated and qualified women divide into three groups, with careerist women a minority in all countries, even in Sweden.

Dr Hakim’s synopsis:

120719 Catherine Hakim’s conference handout

The Institute of Equality and Diversity Practitioners

My thanks to Helen for bringing to my attention The Institute of Equality and Diversity Practitioners, an organisation founded in 2009. Website She writes, ‘If the Board members and other members of The Institute of Equality and Diversity Practitioners can’t provide you with evidence of a positive causal link between ‘improved’ gender diversity on boards and enhanced corporate performance, then who can?’ A good point, Helen, and well made.

I see the IEDP has a Board consisting of seven women and one man. Now that gender ratio  is interesting because it’s the same ratio that exists (on average) across FTSE100 companies’ boardrooms, albeit in the opposite direction. As always in the world of equality and diversity, female domination of senior-level bodies is admirable and to be sustained, while male domination is regrettable and to be destroyed.

I’ve emailed the IEDP the following message, and will let you know of anything that emerges from them. Don’t hold your breath.

Greetings from the Campaign for Merit in Business. You might be interested in the following piece posted by The Institute of Economic Affairs:

I can’t imagine a body of people better qualified than yourselves to provide the elusive evidence for a positive causal link between ‘improved’ gender diversity in boardrooms, and enhanced corporate performance. We’ve been in touch with many organisations and individuals who claim the link exists, but not one has been able to provide a shred of robust evidence. Maybe you’ll be the first organisation to do so? I do hope so. Finding the Higgs-Boson particle was straightforward by comparison. A copy of this message will be posted on the blogs and Have a nice day.

Michael Klein’s response to the House of Lords ‘Call for Evidence’

My thanks to Michael Klein for agreeing to make available his response to the House of Lords ‘Call for Evidence’. I shall make my own response available next Tuesday, along with details of next Monday’s meeting of the HoL Sub-Committee, and in particular what was said by Susan Vinnicombe and Ruth Sealy of the Cranfield International Centre for Women Leaders.

The link to Michel Klein’s submission:

120713 Michael Klein’s response to the House of Lords ‘Call for Evidence’

Your invitation to the House of Lords next Monday, 16 July

At 4pm next Monday, 16 July, there will be a meeting of a House of Lords sub-committee reviewing ‘gender balance in the boardroom’, with respect to EU involvement in this area. I’ll be attending the meeting myself as a spectator, and I invite you to join me there (one supporter has already confirmed he’ll do so). If you can join us, please let me know by emailing me at The meeting will be in Committee Room 2, House of Lords, and is scheduled to finish at 6pm. Background information below:

The meeting is open to the public, but the public isn’t permitted to make any points or to present questions. This is unfortunate given that the two most senior people at Cranfield International Centre for Women Leaders, Professor Susan Vinnicombe and Dr Ruth Sealy, will be the ‘witnesses’ examined in the first hour of the meeting. There are a number of questions I’d like to ask them in such a forum, and hopefully I shall one day.

I urge you to respond as soon as possible to the committee’s ‘Call for Evidence’. The deadline for submissions has just passed (10 July) but I’ve been assured that they’ll accept late submissions for a short period. So get your response in TODAY! At the same time, why not take a rare opportunity (in your response) to table a question or questions you’d like the sub-committee to consider, or maybe to ask Prof.Vinnicombe and/or Dr Sealy? Details of how to respond to the ‘Call for Evidence’ are available through the link below. It took me maybe an hour to prepare a response on behalf of Campaign for Merit in Business. Don’t be put off by the questions which assume that gender diversity in the boardroom is intrinsically a ‘good’ thing (most of them do). Make your opinions known. Thank you.

A whining journalist at the ‘Times’

I’ve just emailed the following to the Times. Ms Cavendish is an Associate Editor, columnist, and leader writer. Feel free to email your own views to, not forgetting to leave a phone number and postal address.

Will the long-running campaign by women to whine their ways into British boardrooms never cease? I refer to Camilla Cavendish’s piece in today’s issue, ‘Why Barclays won’t have a female boss’. Ms Cavendish opines with respect to an ambitious woman, ‘It makes no sense to let her be permanently derailed if she takes 10 years out to be a full-time mother’.
On the contrary, it makes complete sense. Let’s do a gender switch, shall we? Any man who takes ten years out to be a full-time father (or to do anything else full-time, for that matter) will surely be ‘derailed’ too. Women are far more willing than men to take long periods of time out of the workplace to look after young children. The majority of women recognise this as a rewarding thing to do – family finances permitting – both for themselves and their children. It’s simply not the onerous duty portrayed by work-centred feminists. Women will therefore be disproportionately impacted by long absences from the workplace. An absence of ten years (or even markedly less, in truth) from the workplace must place individuals (of either gender) at a disadvantage in the fast-moving world of business.
Please, no more whining articles about this topic. We’ve had more than enough of them over the years.