This week the Wall Street Journal reported that US companies had reached a new peak in recruiting women for membership on boards of directors.
"In the first five months of 2018, women accounted for 248, or 31%, of new board directors at the country’s 3,000 biggest publicly traded companies, according to an analysis of corporate filings by ISS Analytics, the data arm of Institutional Shareholder Services. That is the highest percentage in at least a decade, and puts 2018 on track to be a record year for new female board members.”
Why? What's driving the shift? Partly it's the recent rash of sexual abuse scandals.
"Shareholder pressure, along with the #MeToo movement, is fueling some of the momentum, board recruiters say…"
Certainly a big factor is political pressure from Wall Street's big boys…
"Big investors such as State Street Global Advisors and BlackRock Inc. are urging companies to diversify their boards and, in some cases, voting against certain board members at firms with all-male boards."
There is certainly a lot of momentum in this direction from organized interest groups. And as far as I can see, there’s no organized opposition against it – though, I often hear grassroots resistance to the idea from conservative and Christian sources. For instance, just look at the comments section of the WSJ piece and you'll see mostly negative comments made along meritocratic lines, the idea being that goals become quotas and quotas become a way to soft-pedal competence.
I can understand this reaction. A lot of the women on boards thing smacks of 'virtue-signaling' (making public statements to signal greater virtue, compassion, or enlightenment, not out of a desire to actually address a problem, but rather for the sake of gaining social status (or avoiding the loss of social status)).
But just because people use this issue to merely signal virtue does not necessarily mean that there are not genuinely real virtues to the position.
I approach issues as a Christian and as a conservative - in that order. And despite the fact that the largest push for 'gender inclusion' comes from tribes other than my own, I see real merit to the goal. The merits are real enough that when I helped build the Vident US Equity Index (VCUSX) we included a factor which penalizes any company with an all-male board, in terms of inclusion in the index.
For me, the Biblical view of gender relations is that male and female are complementary. It differs from two conflicting myths: One says that men and women are the same in every way except in the physiology of reproduction. The other myth says that male and female are so different, in so many ways, that they are inevitably at odds with one another. So we have the myth of sameness and the myth of inherent conflict.
A complementary view says that we are indeed different and that those differences are essential to the good of humanity. We need each other's differences.
That's why I believe that a family cannot reach its full potential without having both a man and a woman in it. Most people would identify what I just wrote as a conservative view. So be it.
But then if I turned around and wrote what I also believe to be true, that the truth of complementarity applies in business as well, that a company which only has male points of view is missing something and that men and women in business leadership have complementary, mutually strengthening effects, most people would identify this as a liberal point of view. So be it.
But both assertions as based on the same anthropology, the same understanding of human nature. They are based on the ancient truth, "It is not good for the man to be alone."
So even though (or perhaps because) I'm personally a conservative, I'm philosophically on board with the efforts to get more women on boards. To me the best of conservatism hews to fixed principles, and it does not set those principles aside simply because liberals are also tapping into them.
However we need a bit of perspective on the research about the issue. When we decided to include having a woman on the board as a factor in stock selection it was due to both the principle that I talked about above, but also because there was substantial data indicating some improvement in investor performance. We don't play virtue signaling or social engineering games with our clients' money.
However, the women on board statistical case is starting to get pushed beyond the data. There have been a lot of claims about strong correlations between the percentage of women on the board and financial performance of the company. Part of the problem is that the studies which 'prove' it helps performance get all the attention. But when you look at a wide array of studies, the idea that pushing up the proportion of women on the board pushes financial returns up a steep curve of reward is simply not well attested-to:
"Given that the findings of studies included in these two meta-analyses varied around these average results, an accurate description of this extensive empirical literature is that correlational findings relating percentages of women on corporate boards to firms’ financial performance are mixed, and on the average lean very slightly in the positive direction but only for companies’ accounting outcomes. The sign and magnitude of the correlations related to a few moderators: For example, in the Post and Byron (2015) meta-analysis, the null relation between female board representation and market performance became positive in countries with greater gender equality. Despite such moderation, these correlational findings do not reveal causation."
So, my conclusions are let's not oversell a currently popular idea. But let's not throw out our own principles simply because someone from another corner of our culturally polarized nation has been its chief champion.
To learn more about a principle-based approach to stock selection like the one discussed here, you can click here.
"Big investors such as State Street Global Advisors and BlackRock Inc. are urging companies to diversify their boards and, in some cases, voting against certain board members at firms with all-male boards. Many investors point to correlations that several studies by McKinsey & Co. and other consulting firms and business schools have drawn between greater diversity and enhanced financial returns as reasons for demanding greater female representation on boards. Other firms are bringing more women into the boardroom in the wake of sexual-harassment scandals, or to help prevent them, recruiters say."