Tesco’s Chairman John Allan’s comment that white men on boards are becoming an “endangered species” threw the thorny issue of board room diversity back into the spot light at the weekend. Senior associate Stephen Roberts explores the details.
Mr Allan has made it clear that his turn of speech was intended to be humorous and that his comments were intended to encourage more women to apply for NED roles. While there are good reasons for believing that board diversity matters, the evidence suggests that progress in achieving greater diversity has been slow.
Does diversity on boards make a difference?
There is a clear consensus amongst commentators that it does. Diversity on boards helps to promote the constructive and challenging dialogue that effective decision making requires. It also engenders trust and confidence amongst an organisation’s stakeholders.
There is also plenty of evidence of a positive correlation between diversity on boards and a company’s financial performance. In their 2015 international review ‘Diversity Matters’, management consultants McKinsey & Company concluded:
- In the UK, greater gender diversity on the senior-executive team corresponded to a financial performance uplift: for every 10% increase in gender diversity, EBIT rose by 3.5%.
- Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.