Quotas: An antidote to the merit fallacy - Women's Agenda

Quotas: An antidote to the merit fallacy

In a recent Women’s Agenda article Kate Ashmor suggested quotas have the patronising taint of illegitimacy and that shareholder activism is the key to getting more women on boards. She argued this is because shareholders will respect and act upon the evidence that adding women to the boardroom mix will add dollars to their pockets.

Ashmor’s arguments are compelling and attractive. They should be true. They should work.

Unfortunately, the business case hasn’t worked, it isn’t working and there are no signs that it will work in the future. Even if we are happy to accept that women must provide evidence of their value contribution before being invited into the corridors of power and even if we assume that ‘business’ is a unitary whole with a common and consistent practice of behaving rationally (spoiler alert: I don’t necessarily think we should assume either of those things) – shareholders have not responded to empirical evidence and quotas are not the antithesis of merit.

Firstly, the business case for gender diverse boards has already been made. The studies cited by Ashmor are not the only ones of their type. Of course, studies of this nature have their limitations. For example, they generally fail to address causality: correlation and causation must be understood as distinct concepts. Where performance and diversity coexist one cannot simply assert that high performance is the direct result of diversity. Nevertheless, I am not suggesting that companies with few or no female directors have performed a thorough critique of all the available information and determined that the business case requires more evidence. I am, however, suggesting that the growth in business-case arguments has not led to any significant increase in female board members.

Blackrock describes recent developments as glacial change. Internationally, in the face of similar ‘business-case’ evidence, the boardroom gender issue has been described as stalled, stagnated and flat lining. In fact, some researchers have explicitly linked the stagnation of gender diversity to the change from moral arguments to business case arguments. Ultimately, the question is: if the business case argument is a reliable and successful strategy then why, in the face of overwhelming evidence, does the discrepancy between male and female board members still exist?

Secondly, merit is a complex and contentious term. Often used to defend conspicuous homogeneity in leadership, merit is a value laden word co-opted into support of individual preference. When a football team is chosen on merit there are different meritorious criteria in play compared with the selection of a ballet troupe or, say, a board of directors. Who decides the necessary criteria for an effective board member? A ‘known quantity’ director may promote social cohesion, but alternative arguments suggest that too much cohesion can lead to dangerous situations of ‘groupthink’ and that a level of ‘cognitive dissonance’ is required when making difficult decisions.

The knowledge or personality characteristics which identify a successful board member are contested. Nevertheless, use of the term ‘merit’ assumes that there is a consensus, that the consensus is supported by evidence and that the criterion are reliable, value neutral and unquestionable. This, of course, is nonsense. In reality, the very fact that women make up only 17.6% all ASX200 boards is all the proof we need that ‘merit’ as a concept is seriously flawed.

Norway’s quota experiment is interesting. It is true that a small drop on value occurred when quotas were introduced and that this drop was linked to the measurable decrease in overall experience of new directors appointed under the quota system. However, the decline in value did not persist and quotas also led to a distinct increase in the average education level of board members.

This evidence could certainly support an argument that quotas are a mechanism for allowing all participants in a certain market to undergo a simultaneous re-evaluation of their definition of merit. No business would be market-penalised for making such a change, but all would have cause to improve their processes such that the evidenced bias in director selection is substantially corrected.

Quotas are not the antithesis of merit, but they may be the antidote to the merit fallacy.

×

Stay Smart! Get Savvy!

Get Women’s Agenda in your inbox