Oops, another politically incorrect report

That makes two in a row. Following on this one

“In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only
nine percent of directors were women. We use the pre-quota cross-sectional variation in female board
representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.”

comes this one from the Bundesbank, no less, which suggests that women bankers take more risks than men, contrary to received wisdom. Alphaville’s Lisa Pollack immediately applied her piranha-like brain to the report and tore some meaty chunks off it, but just because you don’t like the result doesn’t mean a report is rubbish (even when compiled by three men).

The advocates of more women on boards have a simple, not to say simplistic, approach. The argument, roughly, goes like this: since half the population is female, it makes no sense to exclude half the universe of talent when picking senior people. Since this half of the population also votes, no politician is going to suggest that appointments should be made on merit alone, or that a man who has worked continuously might be better suited to a post than a woman who has taken time out for the rather more important business of child rearing.

For all the sanctimonious guff from Mervyn Davies and his crusaders for gender diversity, the truth is we don’t know whether more women at the top would make businesses run better. That, surely is the acid test. As for the indication (more research needed, natch) that women bankers take more risks, banking is all about risks; the banker’s skill is in assessing and understanding the risks, not avoiding them. So we’re no further forward, really.

Wimmin aboard

The world is collapsing around our ears but how do we save it? Why, more women on the boards of the biggest companies, of course. Before she got into trouble at Passport Control, our dear Home Secretary told us that better use of female talent would boost the UK’s economy by over £60 billion. She’s setting up a Women’s Business Council to tap it.

Here’s a word of advice to anyone tempted to join: lie down until the feeling goes away. It’s not a serious project, just another talking shop, another feeble attempt by Big Dave to shore up his crumbling support among women voters. That £60 billion consists of £21 billion from women who’d like to work longer hours, and £42 billion from currently frustrated female entrepreneurs. No, I don’t believe there’s any scientific basis for these figures, either.

The idea is taking root that somehow if only we had more women on our biggest boards, everyone would do better (apart from the displaced men, of course). Mervyn Davies, the banker who was born-again as a Labour luvvie, wants the UK’s biggest companies to have 25% female directors by 2015, and wrote to them demanding to know, by last August, how they proposed to do this. Sensibly, two-thirds of them haven’t replied. One chairman who has, pointed out that to meet the target every single board appointment between now and 2015 would have to be female, and did Merv think this was a good idea?

Besides, Davies and his monstrous regiment should have a care before stepping up the rhetoric and threatening to impose compulsory quotas. Terry Smith has unearthed a 60-page study from Norway which is not helpful. It concludes:

In 2003, a new law required that 40 percent of Norwegian firms’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose
boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance, consistent with less capable boards.

This is bad enough, but the (few) women in the UK who are actually at the top of large companies have been curiously silent on the subject. I’m told this is because they see such targets and quotas as irrelevant at best, and demeaning to their achievements at worst. Were a clutch of them to break cover, Davies’ daft demands would be ditched. Come along, girls (oops).