A diverse board can boost accountability. Photograph: Getty Images.
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With so many measures and initiatives, why is boardroom diversity taking so long?

Diversity in substance, not just in appearance, brings benefits to boards.

There has been plenty of talk about the need for greater board diversity in recent years. With so many measures and initiatives being touted, why is it all happening so slowly?

Diversity should be an attribute of a balanced and capable board and, in itself, is not a new concept. However, calls for more diverse boards have grown louder in the wake of the 2008 financial crisis. Against a backdrop of bank failures and bail-outs, concerns about executive pay and aggressive tax planning, the public have looked at company boards and taken the view that their shortcomings might be connected to a lack of diversity in board membership. And it is not just companies. Other bodies, including governments, have faced similar scrutiny. Board diversity has become an issue for mainstream governance.

But how does diversity improve a board, or company's, performance? Corporate governance has historically emphasised the need for a balance between executives and non-executives to ensure that boards have the skills, experience, independence and knowledge required to enable them to carry out their responsibilities effectively. This might not be enough. To achieve long-term business success, companies have to take a wider view on how they interact with the markets in which they operate, and meet a range of sometimes conflicting responsibilities. They have to achieve a business purpose, behave in a way that is acceptable; meet legal and regulatory requirements and be accountable for their activities. Having a diverse boardroom can help.

For example, it helps for the company to be in tune with its key internal and external stakeholders, and see business opportunities and threats through their eyes. Board diversity can help boards understand their customer, supplier, employer and other relevant perspectives better. As companies become more international, this adds another dimension.

In order to behave in a socially acceptable way, the board may wish to consider the message they send about their company - if members look like each other rather than like society, for example, this can undermine people's confidence. Furthermore, diversity encourages rigour in the boardroom. Although a tightly knit group of like-minded people, with common experiences can take decisions quickly and efficiently, there is always the risk of groupthink. The problems here are well documented. An over-riding objective of sticking together may also mean that common limitations and biases go unchallenged. Better decisions are made by a board with members who are prepared to consider a wider range of alternatives.

This is easier said than done. We know that there are practical challenges. A board cannot accommodate an endless number of people representing different stakeholder groups in order to mirror society at large. Also, having a diverse board does not automatically mean that diverse viewpoints will shape company behaviour and decisions. Board members need to work hard to enable a robust process that allows different views to be expressed, heard and considered. They will still need to work as a team, serving the interests of the company and sharing responsibility for its decisions. It will take effort and commitment by board members to develop a mutual respect for each other and to recognise the value of an open exchange of diverse views.

The pipeline issue is also receiving more attention today. Building a pool of diverse and talented individuals across an organisation is important and often more difficult than introducing diversity through board appointments. Some challenges have deeper roots in institutions and society more generally, and cannot be resolved by a company alone. For example, if certain groups are fundamentally disadvantaged within the education system, it will be difficult in the short term for companies to identify suitable members of those groups for board positions, or to make sure that they are properly represented in the company's talent pipeline. But then again, the diversity debate is giving us an opportunity to raise public awareness of such issues.

There is no one-size-fits-all answer to the question of board diversity, and a company needs to reflect on its business purpose, the society where it operates and the stage of development it has reached. It will also take a lot of effort for companies to find ways to take account of many different perspectives, while keeping the board a practicable size. Diversity in substance, not just in appearance, brings benefits to boards.

Jo Iwasaki is Head of Corporate Governance at ICAEW.

Photo: Getty
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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.