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By sabye |

Wednesday, December 15, 2010

By Melissa J. Anderson (New York City)

Has the time come for bolder policies for diversity at the top of corporations?

That’s what was discussed last Friday at a conference hosted by the Athena Center for Leadership Studies at Barnard College and the Sanford C. Bernstein & Co. Center for Leadership and Ethics at Columbia Business School.

The first half of the conference focused on academic research on the subject, performed by social scientists and researchers from top business schools. The second half focused on the practitioner perspective (check back next week for another article discussing the practical reality of corporate gender targets).

By and large, the researchers agreed that a more targeted approach to gender balance in corporate leadership would be beneficial. Kathryn Kolbert, Director of the Athena Center for Leadership Studies and Professor of Leadership Studies at Barnard, said, “When you change the people at the table, you change the conversation.”

The Indian Analogy – Participation, Effectiveness, and Role Models

Bruce Kogut, Professor of Leadership and Ethics and Director of the Sanford C. Bernstein & Co. Center at Columbia University, opened the conference, explaining that research into the value of gender targets or quotas in a business context is difficult to research, simply because the sample size of women leading the largest companies is so small. For this reason, he continued, we must often look to studies of female leadership in other cultures and contexts, and seek out analogies.

The conference’s keynote address, by Esther Duflo, Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT, studied the effects of gender quotas in the Indian political system. According to Duflo, the country has legislated that 1/3 of all village council seats must be comprised of women. Additionally, 1/3 of village council chiefs must be women.

The research was clear – the quota system paid off, in terms of participation, effectiveness, and creating role models.

Those councils with female leaders tended to be more accessible – with meetings held at times women could attend them and in places where women simply could go. Analogously, Duflo said, in the corporate world, companies with a female chairman of the board are unlikely to hold board meetings at 10pm, or at other times when family responsibilities usually take precedence.

Interestingly, she said, the research team did not observe a spike in female attendance in these meetings. But it did observe a spike in female participation. “They were much more likely to speak,” she said. In fact, everyone seemed much more likely to speak, which had implications for new leadership and democracy.

Additionally, those councils with women leaders had less corruption, and a greater focus on building water wells and new schools. In general, they saw more getting done. “If you put less in your pocket, there’s more to go around,” remarked Duflo.

And the effect was sustained. If villages reverted to a male leader in the next couple of years, corruption remained low.

Finally, the research indicated that female village chiefs not only changed stereotypes, but created role models for teenage girls. “After two years, people were more likely to associate women in politics in places where there was a woman political leader.”

Additionally, after two cycles of female leaders, girls were more likely to say they want to have a career and that they want to be a village chief.

Duflo summed it up, “Quotas do matter. They effect female participation, they increase the public good, and they reflect a greater willingness to elect women in the future and increase teenager aspirations.”

More Quota Studies

The next panel featured some of the most recent research on the value of gender quotas or targets, as well as research into how they can be implemented successfully.

Amy Dittmar, Associate Professor of Finance, Stephen M. Ross School of Business at the University of Michigan, discussed her study, “The Impact of Firm Valuation of Mandated Female Board Representation,” based on the Norwegian experience of boardroom quotas. In 2003, the Norwegian government legislated that women must hold 40% of all board seats of publicly traded companies. “For firms that already had women on their board, the stock reaction was positive. But for most firms it was negative,” she said.

Dittmar’s research showed, “It was not the gender that mattered. What explains the drop in value is that [the individuals selected to take the board positions] had less experience.” This had important implications in the pipeline development space.

She also reported that the percentage of public firms going private has increased since the legislation, and that the percentage of Norwegian firms that had begun listing themselves instead in the UK has also increased. Both of these anecdotes reveal that firms are looking for ways around the government’s intervention.

Next, David Ross, Assistant Professor at Columbia Business School, discussed the value of diversity in business strategy. He said, “When you have people from an outgroup, it tends to improve decision making.” Since firms are all operating in a difference context, he said, his research team produced a longitudinal study of firms in the S&P 1500, on the effects of having greater numbers of senior executive women at the same firm over time. The results?

“The exact same company tends to do better when they have one senior executive woman than when they don’t,” he reported.

In another study based on Danish business leaders, Ross found that, “When a CEO has a daughter, female wages rise relative to the wages of men.” This indicates that the “would you want your daughter to work here” question has proved salient in practice.

Following Ross, Mona Lita Krook, Assistant Professor of Political Science and Women and Gender Studies at Washington University in St. Louis, presented “Quotas for Women on Corporate Boards: Lessons from Politics.” Political gender quotas have been in place for significantly longer than corporate ones, so there is more data available for research, she explained.

Krook said that the lack of women in leadership positions can be examined from an economic perspective. On the supply side, the question is whether there are enough female leaders. “This is not the case. There are plenty of qualified women.” So the issue must be on the demand side, she explained. “Women are qualified but discriminated against and this is when the quota system comes into play.”

A number of countries have enacted political gender quotas, but, she said, resistance to political quotas is incredibly strong. Individuals and governments have worked hard to undermine them.

Non-quota strategies (or supply-side strategies like pipeline development), she said, have a much more modest effect on political systems than a targeted approach. Quota systems are a means of fast tracking female leadership, and have a greater effect on role models, democracy, and participation.

Finally, Susan Sturm, George M. Jaffin Professor of Law and Social Responsibility, Columbia Law School, gave a talk on “Reframing the Equality Agenda.” Sturm’s talk focused on the practical implications of how to incorporate gender diversity within an organization.

“What’s going to connect the move at the top to more systematically rooted changes?” she asked. According to Sturm, culture change has to be involved in generating more balanced corporate leadership and institutional change.

The Belfast Telegraph has a story today that says:

Another group of Northern Ireland business leaders has waded into the row over the proposed lowering of the corporation tax rate.

The Northern Ireland Economic Reform Group (NIERG) has refuted claims that the Republic of Ireland’s low corporation tax regime "yielded very few real net jobs" and that Northern Ireland’s adoption of the 12.5% rate would add nothing to the economy here.

The statement came after tax commentator Richard Murphy, who runs the website Tax Research UK, told the Belfast Telegraph that lowering the rate would simply be "a clever marketing tool" and that such a move would turn Northern Ireland into a "tax haven".

The UK rate is currently 28%. The NIERG said that the results of the policy pursued by the Republic of Ireland speak for themselves.

You would have thought that would be enough to end the argument! But they wade on none the less:

"Foreign direct investment has generated more jobs per head of population in the Republic than in any other country," the group said in a statement.

"At a time when global foreign direct investment flows were down 30%, the decline in the Republic was just 4%.

"There are nearly 150,000 jobs currently in the Republic that come from foreign direct investment.

"The evidence from the Republic of Ireland is irrefutable that the ability to adopt a low corporation tax rate would put a powerful new economic tool at Northern Ireland’s disposal.

"It is vital that we equip ourselves with a proven means to boost economic growth."

The NIERG produced a report earlier this year which said lowering the tax rate could create up to 90,000 jobs over a 20-year period.

With apologies to the Belfast Telegraph for borrowing quite a lot of their story, but since they in turn quote most and attribute blame to me I hope I will be forgiven.

And the truth is that this logic is quite extraordinary. Ignore for a moment that I have explained why the experience of the Republic cannot be replicated in the North in my report for the TUC and Irish Congress of Trade Unions entitled “Pot of Gold or Fool’s Gold"?” and instead go behind these extraordinary claims.

First there is the assumption that the EU will agree to this change, and there is considerable doubt that it will. I have a track record on being right on such things.

Second, if the tax rate is cut the block grant to Northern Ireland will be cut by up to £300 million. As I’ve written before:

But this factional view is an inappropriate basis for determining tax policy – which has to be based on the interest of the community as a whole. And as experience in the Republic has convincingly proved, when the state recedes – as it would have to if this proposal were adopted – the private sector does not rush in to fill the void. It flees in the face of falling demand. As a result you might get smaller government – the Taxpayer’s Alliance’s sole interest – but you also get an impoverished society.

Of course those proposing this change don’t care about that – they’ll make anyway.

Third though, note that all the evidence presented to the House of Commons on this issue was unrelated to jobs. They all said that jobs related boosts for the Northern Ireland economy were based on treating it as a cost centre – but they all said they wanted to make Northern Ireland a profit centre – a conduit for profit irrespective of jobs created in other words. That’s in ordinary language a tax haven and gives complete lie to their real objectives. It takes only a moment to realise how in truth this has hollowed out the economy of the Republic.

But worse, note the extraordinarily limited thinking on display. It is that of the rational economist which assumes that the future is entirely predictable on a probabilistic basis, that the past is a certain guide to the future and that uncertainty does not exist as a result. So, they argue, because for a while (and using selective evidence until 2008) a policy seemed to work in the Republic it is bound to work for Northern Ireland in the future. That, however, is not true. The world now is not what it was. An uncertain event happened. And therefore the past cannot predict what will happen – and most certainly Northern Ireland’s future cannot be predicted on the basis of the Republic’s past – although the risk that the Republic’s present might be reproduced is clearly significant.

My conclusion? These are economists and accountants pursuing a policy in pursuit of their own aims based on outdated and inappropriate methodologies for thinking that is bound to be counter to the best interests of Northern Ireland as a whole. Northern Ireland would be very wise to give them a very wide berth.

Ireland

Reference research: research Dr. and law research and general research and my bookmark page




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