Few are chosen in our great ‘meritocracy’

The myth of meritocracy is exploded in this latest report by Ownership Matters. 

The group of prominent Norwegian women who used ‘quota law’ in their country to build themselves a portfolio of boards were often referred to as the ‘Golden Skirts’. The term was generally used in a mildly disparaging way by those who blamed quota law for removing women too fast from management and executive ranks or by those who secretly aspired to be one.  The latest report by Ownership Matters has crunched the data and tells us that in Australia, which prides itself on being a meritocracy, that we have both ‘Golden Skirts AND Tweedy Trousers’.

The OM report ‘Many are called, few are chosen,’ is based on an analysis of 1,777 executives and 4,143 non-executives who have served on ASX 300 company boards from 2005 to the present day. OM found that there is a strong bias towards appointing existing ASX300 directors to vacancies and women are more likely to appointed to an additional board than men. In the past three years, 40% of all serving female directors accepted an additional appointment compared to 17.5% of all serving male directors. The average number of seats per director for women has risen to 1.45 (from 1.3 in 2009) while for men the ratio has decreased to 1.18 (from 1.23 in 2009).

Other key findings were:

  • There is a strong bias toward appointing existing ASX 300 directors to vacancies (‘in pool’ appointments).
  • Since 2005, 38.2% of all vacancies were filled from directors with an existing ASX 300 board seat.
  • Boards of the worst performing companies refresh themselves only marginally faster than companies that perform the best. 
  • The tenure of NEDs in the ASX 300 pool lengthens with each position attained.
  • The proportion of NED seats occupied by men, who have been in the position for greater than 10 years’ greatly outnumbers women in a ratio of 9:1.
    - Former top lawyer, Nora Scheinkestel, is the only woman to make the top 10 for non-executive directors’ cumulative years of service since 1/1/2000. She comes in at number six with a score of 72.58 across 15 companies. 

Does this really matter? The answer is not black or white.  

In many ways, the prophesy of Dame Helena Morrissey OBE, who founded ‘The 30% Club’ in the UK in 2010 to actively (but gently) encourage the nearly all white male club of FTSE Directors to appoint more women, has come true: That as more women join boards without the imposition of quotas, the more they can demonstrate the value they add and, “By the time we get to 30%, the system will be self-perpetuating.” The question is what system? The one in which a group of elite individuals (men and women) believe they are best suited for ‘merit-based selection’ to the governance roles in our top companies. Not sure that shareholders and investors would agree – which OM as a leading proxy advisor points out.

When I interviewed Helena for my Churchill Fellowship in 2011 and, subsequently, obtained her tacit approval to set up WOB in the UK, she knew we differed on our approach to gender equity on boards. The concept of an invitation-only club was always slightly anathema to my co-founder Ruth Medd, and myself, as we did not want to go about solving the problem of under representation of women by replicating the club approach. In other words, you need to be in the club or the inner circle in order to get on the radar of those doing the looking. This was often referred to as being selected on merit – as opposed to gender or any other relevant criteria. 

WOB believed the real issue was both visibility (ie, women not being seen) AND the nomination process where there was (and still is) a lack of transparency around vacancies, with many boards reluctant to appoint those outside the club. Hence, Women on Boards is open to all and it is free to post a position on the WOB vacancy board.

OM asserts it has published its paper as the appointment of high-quality, diverse and suitably skilled directors is fundamental to good governance. As stewards of $1.7 trillion of capital (Market cap of ASX300 at publication), “high performing boards of listed companies are an important driver of the long-term health of the Australian economy and the retirement incomes of Australian savers. “

Shareholders and investors aside, perhaps we need to look beyond the issue of whether it's men or women in the club and to the notion of meritocracy and the mistaken view we have of ‘merit’.  With this in mind, check out Michael Sandel’s brilliant podcast on the Case Against Meritocracy.

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