Do investors care about diversity? - Ciel HR
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Recently Goldman Sachs said that they would not do IPOs for companies whose boards do not have at least one diverse member. Many more banks and investors could follow suit. How deeply they care about it? Do we believe that a company with men and women on its board is more likely to deliver outstanding result compared to a company who lacks diversity?

We must be a true reflection of the society

A look at the variety of plants, vegetables, animals and all other natural creations tells us, diversity is fundamental to our mother nature. We must reflect that in all our actions. We see this working well in our families where men and women, boys and girls, young and old play equally significant roles.

Organisations are microcosms of the society we live in. Why don’t they have men and women in equal numbers at all levels? It is simple to say that they do not get the talent with the desired capabilities and hence, there is a lack of diversity in the board room.

Devil’s advocate will argue if we searched enough. However, we need to think about how deep-seated the belief or lack thereof about the criticality of diversity in the room is. Rather than arguing about the pros and cons, why don’t we simply accept diversity as a fundamental principle of nature and apply it in our organisations?

Many a times, managers tend to push women out of the class of high-potentials or deny them the opportunity to belong to this exclusive club. They believe, women cannot persevere through the supposedly arduous path to the top and will eventually drop off the journey. They would rather give the spot to a man in the limited club of high-potentials. Though this idea has been waning, yet it is seen in large to a significant number of instances in talent review discussions. Organisations would have to be watchful of diversity in their club of high-potentials and take affirmative actions to improve it.

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Holistic or Atomistic

Each individual is unique in his or her capabilities, experiences and beliefs. Organisations run a huge set of connected activities in order to either solve the problems of a large group of customers or bring them something that makes their lives better. To excel in this activity, the leaders need to see an integrated view of the challenges and opportunities. Normally these are not visible easily; some of these have to be deciphered intuitively and perceptually understood.

Undoubtedly we need the combined abilities of people who can look at performance, market developments, customer engagements and stakeholder behaviours from varied perspectives. Some are naturally inclined to view these through the lenses of data and information while some look at these through their intuition, spot the patterns and watch the changes in behaviours.

What a better way than taking a holistic view? Women and men, young and old, home-grown talent and lateral hires, people from multiple ethnicities and different routes in their education to ascend to the top bring a variety of experiences. The leader has the unique advantage of integrating all the views of the leadership team and taking a well-informed decision.

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Investors must care!

Investors care about the progress the company makes; the time horizon of their investment may vary and hence, their priorities. However, the bottom line is about the returns it earns them, short-term, medium or long.

There is no doubt that the long term prospects of a company are better than their counterparts who take an atomistic view of events and take decisions related to their products, services, distribution, people and customers.

A possible argument against the practice of diversity could be that leading a diverse team is tougher because it takes time and efforts for the management team to take a view, listen to one another and hence, build consensus. In the short-term, it is expensive for the company to be managed this way. For a short-term focused strategic investor, the company is a mere instrument for the returns on the equity invested. However, companies must resist any pressures to take short-cuts because they are in the game for the long term and hence, must make progress in the right direction rather than following expeditious ways of doing things and then trying to amend practices as an organisational development initiative.

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The management team needs to have the culture of evoking viewpoints of multiple stakeholders, listening to them and taking decisions based on the combined wisdom rather than one or two people making the decisions. Diversity practices make the organisation succeed in the long term and hence, investors care!

Ref: https://www.morningstar.com/blog/2018/12/18/diversity-inclusion.html

http://www.forbesindia.com/article/stanford/do-investors-really-care-about-gender-diversity/57411/1

 

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