January 25, 2010

On Diversity, Academics Get It Wrong

      Three European academics from IMD International, the Swiss business school where I taught in 2002-03, published a lead story in the January 25th Wall Street Journal (http://ow.ly/10k3B) titled “Why diversity can backfire on company boards.”  

      They contend that diverse board members ask too many questions and are considered “clueless” or too few questions and considered “insecure.” They worry that diverse board members get labeled, and that “like-minded” board members (read, white males) make judgments about newcomers, compare notes, and engage in “groupthink” about their diverse colleagues. Judging from their frequent use of female pronouns, one senses that they are referring primarily to women. 

      I’m left wondering what boards they sit on. How many diverse directors have they worked with? Have they ever participated in an executive session of a board in crisis? Based on the boards I have served on in recent years – ExxonMobil, Goldman Sachs, Novartis, Target, and Medtronic, to name a few – these academics conclusions could not be further from the mark.  In fact, it is lack of diversity that gets boards in trouble.   

      I’ve sat in board meetings with fine directors like Ruth Simmons (African American on Pfizer and Goldman Sachs boards and president of Brown University), Anne Mulcahy (on Target and Citigroup boards and chair and former CEO of Xerox), Bob Ryan (African American who is lead director of Hewlett-Packard and on General Mills, Black & Decker and Citigroup boards), Ann Fudge (African American on GE and Novartis boards), Reatha Clark King (African American on Wells Fargo and ExxonMobil boards), Marilyn Carlson Nelson (chair of Carlson and on ExxonMobil and World Economic Forum boards), Srikant Datar (Indian on Novartis board), or Sol Trujillo (Latino on Target board and former CEO of Telstra). I’ve seen these directors’ courage, intellect, experience, and judgment inform the actions of the companies they direct.  I understand why King and Nelson are both recipients of the Director of the Year award from the National Association of Corporate Directors. 

      If the authors had participated with any one of these directors or dozens like them, they would quickly recognize they are some of the finest governance leaders in the world. I have personally witnessed their remarkable contributions to the corporations on whose boards they serve, especially when the chips are down and the organization is facing challenges. 

      Instead of worrying about diversity backfiring in the boardroom, we should be researching what happens when there is a lack of diverse experiences at the board table. In my research of boards, many of those that got in trouble were characterized by similarities of experience that not infrequently led to group think and passive support of management. 

      If I could propose a single cure for the governance ills of many boards, it would be to restructure the board with directors from highly diverse backgrounds and diverse life experiences.  That would do far more to improve governance than most of the reform proposals so popular among outside governance experts.