Board Leadership - Why the diversity of your board matters so much
16 March 2023 - Diversity is critical for board leadership. This is a central plank of our point of view. But what sort of diversity? In this fourth in a series of blogs examining questions of board leadership and governance, Prof Richard Calland tries to get under the bonnet of a difficult and delicate subject.
“Diversity” can mean different things to different people, and it often leads to misinterpretation and controversy. So let me begin by reaffirming some underlying principles: First, those with power, such as a board of directors, need to be competent and capable. But, secondly, since the leadership challenge is now far more complex, and the legal fiduciary and other stakes far higher, in order to tackle current and future sustainability challenges, those boards are going to need to have a far more intellectually diverse mix of people than generally is the case at present.
These are two inter-locking, foundational principles.
Thus, the argument in favour of greater diversity in the boardroom is based on the idea that such diversity provides both intrinsic and utilitarian value. It is important for whether an organization can deliver on its purpose, but also for how it achieves its goals.
In South Africa, where I am based, the notion of diversity is directly connected with the country’s painful apartheid past and the colonial period. “Diversity” is not only a term covering the legal responsibility of organisations to transform their employee and management profile, but also a loaded and contentious term.
My career as a practicing lawyer and more recently, academic, has been in service of equality rights. As a white man, from a reasonably well off social background in the UK, I am not only conscious of the impact that colonization as well as apartheid had, but supportive of the need for both affirmative action policies and the need for quotas to propel socio-economic transformation in the face of stubborn resistance in some quarters of society and the economy.
In this context, the topic of diversity in South Africa often attracts a lot of heat, and not always too much light. Some people object to what they call “reverse discrimination”. The public discourse has suffered because the sort of socio-economic transformation the diversity imperative is directed towards is generally focused on the race dimension – not surprisingly, given the brutal discriminatory impact of apartheid – and sometimes gender.
These considerations are vital for any organization, anywhere in the world, and not just in South Africa. Because CISL’s conceptualization of ‘sustainability’ encompasses the social and economic dimensions as well as the environmental and the ecological, it behoves corporate leaders to think hard about how the organization that they lead can make a positive impact on a socio-economically unjust and, in many markets, precarious world.
Why? As I argued here before, in the ‘foundational’ blog, a broken world is not a world in which business or an economy can thrive. Global system pressures, trends and shocks indicate that the risks are not just from runaway climate change, but also from social protest and violence. As population increases towards its likely peak in mid-century of ten billion people, so the demands on water, energy and food will intensify just as climate change makes it harder and harder to meet those needs and to protect billions of vulnerable people from its consequences.
It is the leadership of companies that has to catch up to this reality, recognising the underlying structural conditions and constraints. Against this backdrop, now is the time for boards to face some disruption, especially in terms of who gets appointed to be a non-executive director.
This is a conversation worth starting and having, however uncomfortable it may be. The top leadership of a company should be able to look out of the window and grasp what is going on in a deep and substantive sense, and then to direct, oversee and be accountable for how the business is run and goes about achieving its purpose.
The buck stops with the board, and it must be able to make the smart decisions needed to protect the long-term value of the company and to ensure that it contributes its fair share to fixing a breaking world before it is too late, as well as to deliver a truly sustainable future – an even more lofty, though necessary, ambition where the case for diversity in the boardroom is even greater if the organization is to understand those stakeholders with whom it will need to engage seriously.
So, assuming that this is an acceptable foundational premise, the next question is what sort of people do you need on a board to be able to play this role effectively?
The answer, I suggest, is that it would not be wise to have a majority of people who went to the same or similar schools and universities, and who have had similar kinds of professional career paths. Nor would it be prudent to have people who have a similar worldview, shaped largely by their class and upbringing. It would it be far better to have a substantially more heterogeneous group of people, something a little more disruptive even, to avoid that well-known, but little-understood phenomenon known as ‘groupthink’.
I ended the first blog in this series by posing a provocation, asking how the board of the future might benefit from having an Archbishop Desmond Tutu or a Greta Thunberg as a member. I did so mindful of the literature on groupthink, which has from the moment I first read it as a post-graduate student in international relations at LSE has stuck in my mind. Then, it was Yale academic Irving Janis’s classic text on how groupthink was the underlying cause of the Bay of Pigs fiasco, and how American President John F. Kennedy was smart enough to learn from his mistakes and to avoid them a year later when faced by the Cuban Missile Crisis.
Even a Tutu or a Thunberg may not be enough; they, too, are privileged by their education, and by the power of their networks and political capital. What about people who are of working class background or who remain rooted socially and professionally in vulnerable communities – whether from a class, spatial development or demographically disadvantaged perspective, such as disability?
In my recently-published book on presidential leadership, co-authored with my Zimbabwean academic colleague, Mabel Sithole, I came back to this literature when thinking about the teams of advisors that South Africa’s five post-democracy presidents have hired to support them. It turns out you can tell a lot about a leader’s judgement and nous from whether he or she chooses ‘yes men’ or, rather, strong characters who are able to confront their bosses notwithstanding their enormous power.
Smart, self-assured leaders recognize that they need to have their ideas challenged by their advisors; they are sage enough to know that an echo chamber will likely lead to weak and misconceived decision-making with faulty foundations. The more a big decision is tested and panel-beaten, the more likely it is to be sound.
So, what composition of human beings is likely to deliver such a decision-making process? Surely, the answer must be greater variety in terms of worldview and ideology.
Which brings us back to diversity. Sometimes the intellectual diversity that I am really talking about will come from having more black people or more women or more young people on the board. But not necessarily so; sometimes it will not.
I’ve learnt over many years of studying politicians and other decision-makers in committees and other fora not to make assumptions about someone’s value system or worldview based on their demographic profile – which is why, by the way, many corporations and other institutions have got themselves into difficulties in South Africa, by making lazy assumptions about what a certain type of diversity will bring in terms of decision-making depth and governance integrity.
Aware that this a delicate subject, where points of view are very often easily open to misinterpretation, I offer this observation based on some specific experience. For close to a decade I ran a judicial monitoring programme based at the University of Cape Town – the Democratic Governance & Rights Unit, and from it, an advocacy campaign called Judges Matter. Based on my research and observations during that time I learnt a great deal about how an analogous institution, the judiciary, went about meeting its constitutional requirement to transform.
It was very revealing. Clearly, as a starting point, it was essential to ensure that the bench was diversified in a radical fashion: at the dawn of South Africa’s democracy in 1994, the great majority of judges were white men of a certain age. The courts would not have any legitimacy if the judiciary did not look, more or less, like the society it was dispensing justice over.
Now, almost three decades later, there are a majority of black judges, and gender-wise, it is finally making progress. But, the most progressive judges are not necessarily the black and/or women judges, though sometimes they are.
Appointing more black, women and young people may help broaden the horizon of the board and improve its strategic foresight. Appointing people with very different kinds of professional expertise and backgrounds is likely to provide even more sensitive antennae for the board.
This is not merely a utilitarian argument – that a smart company will have an intellectually and socially diverse board so it can govern and lead the company more effectively, but it is also a principled goal to attain: diversity has an intrinsic value of its own.
Accepting that your current board may not have the right diversity will be uncomfortable; it may require a substantial change in the composition of the board. Politically it may not even be possible, since generally turkeys don’t vote for Christmas. But, over time – relatively fast, that is, since time is short – boards are going to have to give themselves a hard look in the mirror and decide if their current homogeneity is not putting them at a distinct competitive disadvantage.