Now for something completely different

I often speak at events for aspiring board directors where I am billed as the speaker with an unconventional — different — path to the boardroom.

Different is an interesting word. It means “not the same” but is also used to mean diverse, divergent, disparate. These words describe the idea of “diversity”, a key topic of discussion on boards, most recently back in the news with two developments.

In Germany, the coalition government has proposed the introduction of a mandatory quota that will require that “management boards with more than three members must include at least one woman“. In the United States, Nasdaq has filed a proposal with the Securities and Exchange Commission that will require disclosures of “consistent transparent diversity statistics” from companies listed or seeking listing on Nasdaq. Nasdaq is demanding at least two “diverse” directors, including one female and one who self-identifies as either “an underrepresented minority” or LGBTQ+.

Earlier there were similar moves for accountability made by the state of California. In the UK the Corporate Governance code has required companies to report on their diversity policy since 2012. In 2017 the Parker Review recommended “One by 2021” asking boards to have one ethnic minority director on board by 2021.

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So far, so … “protected characteristics“*.

There is, of course, nothing wrong with this approach to building diversity and inclusion. After all it eases reporting to show intent, action, progress.

It is just that it is insufficient and reductive.

It is also reliant on self-disclosure by individuals for many protected characteristics e.g. sexual orientation which, much research shows, often leads to “out” individuals suffering discrimination in the workplace anyway.

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The term “cognitive diversity” has been gaining currency of late. Presumably to address some of the obvious shortcomings of the “protected characteristics” approach to diversity. The understanding of the term however is sketchy and variable. Questioning chairmen often elicits disheartening mealy-mouthed responses. That lack of clarity is ultimately unhelpful because if interviewing boards do not know how to test meaningfully for cognitive diversity, they cannot really choose between one candidate or another.

Further confusion arises when based on a protected characteristic, a person is presumed to tick the “diversity” box when their presence could just bring more of the same to the group. For instance, I have had occasion to point out to a few, who notice my gender and ethnicity and think of me as “diversity”, that with our elite education from the same or similar institutions and our socio-economically privileged backgrounds, we may be more cognitively similar than they might imagine.

It turns out it is not that simple to test for cognitive diversity after all!

So what is a chairman or a board to do?

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To go beyond tokenism on “difference” or “diversity”, we need to practise the governance of “difference” differently. Starting with how we recruit board directors. Going beyond things they cannot change for most part — protected characteristics — to exploring how those characteristics and other experiences made them who they are, while not presuming they make them different by default.

Here based on my experience from both sides of the board interview table are some practical tips.

First, from the interviewer side:

Try to understand what makes someone different. Then be prepared to listen to the answer with an open mind.

One of my colleagues — let’s call her A — would, at first glance, tick perhaps nothing more than the gender box for diversity. However her backstory – her parents and how she grew up surrounded by people from all around the world – is so fascinating and rich that her empathy and deep understanding of “difference” and “othering” falls into place instantly once you hear it. I call this “formative diversity”.

Similarly people can bring “experiential diversity”. My friend A has also been a CEO in a crucial technology organisation where as a woman and a non-engineer she was an unusual appointment and her experience has been valuable. Similarly another friend of mine — let’s call him B — came to cybersecurity via a career in law enforcement and military intelligence, and has an altogether different, practical and valuable lens on cybersecurity shaped by those experiences.

Learn to differentiate between “being” and “performing”. Author BrenĂ© Brown has written about the important distinction between “being vulnerable” and “performing vulnerability”. The former can enable authentic connection, while the latter is exploitative and can damage trust.

For every truly authentic “different” person I have met, I have also met another who plays up some or the other aspect of their life as if it entitles them to special dispensation. It is off-putting in work settings. In interviews, it is a certain death knell. It is important that interviewers learn to probe respectfully to understand the actual value of difference.

For the interviewee:

Learn to articulate how your difference adds value. Being effective on modern boards requires perspective, provable and differential technical skills, and independence of thought.

Perspective can be shaped by difference in experiences — not just at work but in life. I can only share my own example. My own experience working with a range of clients including PE investors, regulators, legislators, mid-sized to large businesses and startups has given me an instinctive interest in and knowledge of the entire value chain of businesses, how politics and regulation constrain or shape strategic timelines, how businesses actually make money, what risks they may face and how they may mitigate them. All of these are useful skills in providing oversight and delivering good governance. Having been outside of the usual corporate career paths, and having worked, studied and lived in three continents have meant my networks are eclectic and varied but the experience also kept me un-embedded and independent in how I approach issues.

It is up to an aspiring board director to reflect on the entire arc of their experience to understand — and articulate — how their “difference” of formative and other experiences deliver value.

For both interviewer and interviewee:

We need to map the interviewing process or conversation to the skills gap being addressed. This of course assumes that the role was transparently advertised with the relevant detail. What we find in the interview conversation should comfort us that we are getting what we are seeking — the interviewer board gets the skills and perspective they seek, the interviewee gets the cultural fit and the challenge they seek.

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There is also the matter of reporting.

Almost all diversity reporting is still focused on protected characteristics. Regulators as well as independent reviewers still focus their efforts on this narrow definition of difference. These characteristics would be insufficient to surface unusual candidates such as my friend B, and can easily miss the unique wonderfulness of my friend A.

Asking for such narrow reporting is an insufficiently strong leadership stance.

Reporting by boards also needs to become less perfunctory e.g. just the mention of numbers of ethnic or other minority members. It must be said that the Parker Review did ask for more clarity on reporting, transparency, role of exec search firms, and internal pipeline. The actual reporting remains disappointing.

There are virtually no disincentives, leave alone punitive measures, for boards not reporting clearly or meaningfully. This is where the regulator could help advance inclusion by sharpening the guidance, knowing fully well that the guidance issued in the past is often used as a checklist by less diligent boards.

But crucially we need new thinking on noting, appreciating, and reporting on true difference.

Until then, board diversity, like the title of this post, may just be a Monty Python sketch!

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*In the UK the Equalities Act 2010 protects nine characteristics namely age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

Thanks are due to Steve Landes for discussion on an early draft and crucial inputs.

(Disclaimer: These are my own views and do not reflect the views of the boards of JP Morgan US Smaller Co.s Investment Trust or Temple Bar Investment Trust or London Metropolitan University, where I serve as a non-exec director.)

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