Thursday, February 24, 2011

Are businesses not greedy enough?

The BBC have comments by four British businesswomen on how and why businesses should fight the disparity between men and women at management level. Here are quotes from two of them:

Moira Benigson, CEO of The MBS Group, executive search consultancy
I believe that corporate rules need to change. Regardless of the talk about equality, many boards continue to stick to old hiring patterns and prefer to hire people that they are familiar with - they hire in their own image.

This perpetuates a lack of diversity that could, ultimately, damage their business. It is this attitude which needs changing, and if it doesn't then boards could be faced with enforced regulations such as the quota system....

Liz Field, CEO of the Financial Skills Partnership
A key argument for greater board diversity is that it increases a firm's competitive advantage relative to those with less diversity....

Both Field and Benigson claim that greater participation of women in the boardroom will boost the performance of businesses.

If this is so, then businesses with high gender disparity - that is, most businesses - are perversely reducing their own potential for profit. This seems strange to me, so I can think of three possible explanations:

1) Gender disparity doesn't really affect profitability.

2) Gender disparity is harmful to businesses, but most businesses aren't aware of it.

3) Gender disparity is harmful to businesses, but business people aren't greedy enough. That is, the people running businesses care less about income than about other factors which happen to increase this disparity. Considering the common criticism of capitalists being interested only in profit, this seems rather bizarre.

In any case, if the exclusion of women from the business boardroom is harmful for the business, over time we should see the sexist businesses being out-competed by the non-sexist businesses. If this is the case, no top-down intervention is necessary, the market will punish inequality, leaving the gender-diverse companies on top.

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