Leading by example


Leading by example Ethical BoardroomBy Charlotte Valeur – Chair, Institute of Directors




The story of Margaret Mackworth, later Viscountess Rhondda, bears retelling – and not just because she was the first female president of the Institute of Directors.

Born in June 1883, Mackworth studied at the University of Oxford at a time when for a woman to do such a thing broke the mould, and later became an active campaigner for women’s suffrage through the Women’s Social and Political Union (better known as the suffragettes). Growing in prominence within the suffrage movement, she was eventually imprisoned for seeking to destroy a postbox. Having been incarcerated, Mackworth went on hunger strike and was released in a matter of days.

With the advent of the First World War, however, Mackworth resolved like many in the suffrage movement to put her energies into her country’s war efforts. (In later years, she would return to her campaign for equality and played a pivotal role in the commemoration of Emmeline Pankhurst with a statue, which stands just outside the House of Commons in London.) During the war, she helped supply munitions from the US to British forces alongside her father, who was so fond of his daughter’s precocity that when he received a peerage he stipulated that his seat in the House of Lords must transfer to her upon his death.

At this point, Mackworth’s life took an almost novelistic turn. She was on board the Lusitania when it was sunk by a German submarine in the Atlantic, going down 11 miles off the Irish coast. She survived, though hypothermia had rendered her unconscious.

Following her recovery and the end of the war, Mackworth went on to use her acumen in the business world, serving as director for 33 different companies and eventually as president of the Institute of Directors. But not all doors could be opened, even to this most trailblazing of figures. Though Mackworth inherited her father’s peerage, the House of Lords barred her entry on account of her gender. The first woman would eventually enter the upper chamber mere days after Mackworth’s passing in 1958.

The final twist in Margaret Mackworth’s tale illustrates the fact that no matter how hard someone might be able to knock, it depends to a large extent on the people inside whether the door will be opened.

Where we are now

Needless to say, the conversation over diversity has changed incrementally but dramatically over recent decades, in the UK and across the world. Put in a contemporary context, Mackworth’s story would still be inspiring, though a little less anomalous. Attitudes towards under-represented groups have shifted. The upper rungs of society are less and less the sole preserve of a single type of person.

Some doors, however, remain frustratingly difficult to open. In some lights, the business world seems to be dragging its feet on this issue.

A couple of years ago, Deloitte estimated that around four per cent of CEO and chair positions globally were held by women. In the UK, recent reports have pointed out that more CEOs of FTSE 100 firms in the UK were named ‘David’ or ‘Steve’ than were women.

Gender diversity has perhaps gained the greatest attention over recent years, but if anything, the situation could be even more frustrating when it comes to other forms of diversity. The Parker Review, the UK government’s independent study into ethnic diversity on UK boards, found that UK-born people of colour make up but two per cent of the total FTSE 100 director population. And that’s before we start to consider other areas, such as neurodiversity or age diversity.

Perspectives on diversity

So, what do those at the top of the business world think? The Hampton-Alexander Review into gender diversity on UK boards and senior management hit the headlines recently when it published quotes from some FTSE executives outlining their thinking on the matter. When asked why so few women held senior positions, reported justifications included ‘I don’t think women fit comfortably into the board environment’, and ‘we have one woman already on the board, so we are done – it is someone else’s turn’. Or how about ‘all the good women have already been snapped up’. Though this review looked specifically at gender, I’m sure we can imagine this logic being transferred to other strands of diversity, too.

Reading these kinds of statements certainly jars in our day and age, but we would hope they represent a tiny minority. Data on a wider scale seems to paint a brighter picture. For instance, in 2018 PwC’s Annual Corporate Directors Survey of US executives found that 94 per cent felt that diversity brings unique perspectives.[1] Not far off that proportion – 84 per cent – also felt that diversity enhances board performance.

At the same time, however, the report seemed to evidence a degree of ‘double-think’ among the directors surveyed. While the vast majority felt that diversity improved the effectiveness of boards, more than half also said that efforts to improve diversity were driven by political correctness. Similarly, 48 per cent felt shareholders were too preoccupied with the topic.

It’s hard to know what to make of these conflicting results. On the one hand, the benefits of diversity on the board seem to be broadly recognised. On the other hand, as business leaders we seem not to have fully internalised the arguments in favour of acting on this knowledge. As an issue, it still appears to be perceived as something pushed from outside, something that is extra-curricular and not fundamental to good corporate governance.

This, I would argue, is the wrong way of looking at things. Furthermore, if this continues to be the mindset, then progress beyond our current situation will remain slow and uncertain.

Improving board performance

Diversity in the board and, more broadly, at a senior management level, should instead be considered a central factor in and indicator of an organisation’s overall governance. A complete lack of diversity is a risk, just as one might consider aspects of the balance sheet or the operating model as a risk. It raises a red flag and should trigger immediate questions about a firm’s practices and culture. It is always possible that these questions may be answered in a satisfactory manner. Then again, they may not be.

Indeed, this has increasingly been the stance taken by influential asset managers, such as BlackRock. ‘Board diversity is important’ a 2017 report from the investing giant argued, ‘from a sustainable investment perspective, given that diverse groups have been demonstrated to make better decisions.’ Expanding on this point, BlackRock contended that organisations ‘are better able to consider, where appropriate, alternatives to current strategies – a proposition that can ultimately lead to sustained value creation’.

Effective boards must aspire to ‘see with all eyes’, feeding in as wide as possible a view on the business landscape to the decision-making process of their organisation. They must leave no stone unturned as they consider possible risks, so it makes little sense to tie one hand behind their back as they do so. Limiting those in charge to one particular type of person would seem to do exactly that.

Without delving too far into counterfactuals, it’s difficult not to wonder, for instance, about the case of Blockbuster. Had its board included a younger, more digitally native member, might it have acted differently?

The benefit of diversity to all

Diversity shouldn’t only be seen in terms of board-level effectiveness. It is also pertinent to the individual members of the board: their own capabilities and progression.

In many respects, an open and inclusive mindset should be seen as a core aptitude
for any board member – just as we might see awareness of risk, or strategic thinking as abilities that every leader should seek to hone continuously throughout their career.

But the link between professional development and encountering diversity is multifaceted. Diversity is not only an area in which one can improve; it is a means to improve.

This is because introducing ‘outsiders’ to a boardroom doesn’t only add to the quantity of what is discussed – thus helping the organisation as a whole – it also helps the quality of discussion. By bringing a new perspective, the newcomer forces the existing group to clarify its thinking, ensuring it is not only intelligible to the ‘in group’. It is through this process that flaws in logic are mostly often lighted upon.

“Effective boards must aspire to ‘see with all eyes’, feeding in as wide as possible a view on the business landscape to the decision-making process of their organisation”

Research by academics from Tufts University in the US illustrates this aptly. For its study, On Racial Diversity and Group Decision-making, a group of social psychologists asked different ‘juries’ of people to adjudicate in a mock trial. The juries varied in their make-up: some were all white or all black, and others comprised a mix of ethnicities.

Unsurprisingly, the more heterogeneous groups were observed to discuss a wider range of information pertaining to the ‘crime’ in question, thus indicating the importance of diverse groups in bringing new information and ideas to the table. Perhaps more interesting, however, was the finding that white members of the juries cited more factual evidence – and were more accurate in doing so – when they were part of a mixed jury.

This gets to the heart of an often overlooked result of diversity. Not only can it be to the benefit of those who were previously excluded, not only does it benefit the organisations that embrace it, but it also is to the good of the existing group at the top – the very people who are sometimes said to be ‘endangered’ by diversity.

The way forward

While many of the benefits of diversity can and do accrue to the companies that embrace it, it must be recognised that this issue is not a problem for enterprise to solve alone. Inequities start more in the playground than the boardroom. To widen the pipeline at the top, you must start at the bottom.

Education is, as with many issues, pivotal. We must be alive to any factors that might
be holding under-represented groups back from studying in areas that often speed the climb to the C-suite. Traditionally, such subjects might have included finance or business administration but, in the present climate, the real game-changer is digital and technical skills. The Higher Education Statistics Agency found that women, for instance, made up 17 per cent of computer science undergraduates in the UK.

Elsewhere, providing women training for board-level and executive roles specifically can provide a route to the board when internal company pipelines are found wanting.

Building women’s networks is also another area we can look to improve. While women have historically been shut out of ‘old boys’ clubs’, we can seek to recast business networks, opening them out to more people, and enabling a wider range representation of society to access the opportunities that a strong network can facilitate.

At the end of the day, however, any efforts to improve diversity must begin and end with the attitude of those already at the top and the companies they lead. It is in their gift to be asking the difficult questions of their recruitment policies – and their recruiters, too.

It might be argued that business can only move as quickly as the society it is in. How can individual firms change the tide, when clearly concerns around diversity do not begin and end in the world of enterprise?

In my view, businesses should aspire to be ahead of the times, not behind them. Margaret Mackworth became an established figure in business even as she was barred by the political establishment.


About the Author:

Charlotte Valeur was appointed Chair of the Institute in September 2018. As Chair, Charlotte is responsible for championing the IoD’s values, promoting its Objects and providing leadership to the Institute, ensuring it delivers maximum impact for its members and stakeholders. Over the last decade, Charlotte been a director of 7 public companies, including three appointments as chair. During that period she has taken part in a complete restructuring of NTR Plc, the sale of REG to BlackRock and, as Chair, overseen a $8bln Merger of Kennedy Wilson Europe Real Estate Plc with its US NYSE listed parent. Charlotte also has a range of unlisted board experience with companies including international engineering firm Laing O’Rourke. She has been a member of the IoD for over a decade.

Charlotte is a corporate governance expert and a keen advocate for diversity in the boardroom, underpinning this advocacy with action by founding Board Apprentice. This not-for-profit organisation provides individuals hands-on experience at the very top of business, and has been cited in the Government’s recent reviews on ethnic and gender diversity in UK boardrooms as a resource for bringing about real change.