Top investor Warren Buffett has recently made a pathbreaking statement. In his annual Berkshire Hathaway letter to the shareholders, he highlighted the 100th anniversary of the passage of the Nineteenth Amendment, which gave women the right to vote.
However, he didn’t stop at that. He then pointed out that women still don’t have a voice on corporate boards, where they are hugely underrepresented. This lack of diversity doesn’t just hurt women and their careers. It can foster poor corporate governance and reduced financial performance.
How did he reach this conclusion? Let’s find out.
WHAT DID WARREN BUFFETT SAY ABOUT UNDERREPRESENTATION OF WOMEN?
Buffett has described a toxic system that has overtaken American corporate workspaces. They behave almost like male locker rooms with the CEO being the bully. He likes obedience to his decisions and fills his board with individuals who are wary of dissent. Discussions become rare and a new kind of crony capitalism takes form where insiders favour insiders.
This kind of workspace leads to an environment that has no conflicting opinions at all. After a point of time, this company becomes incapable of dealing with big problems. Long term solutions also become largely absent.
This is what Buffett had to say about this culture –
“Audit committees remain no match for managers who wish to game numbers,” Buffett wrote. “I have yet to see a CEO who craves an acquisition bring in an informed and articulate critic to argue against it… The current system, whatever its shortcomings for shareholders, works magnificently for CEOs and the many advisors and other professionals who feast on deals.”
That’s where diversity comes into play. Women are largely absent from the decision making processes in the corporate board rooms of most of the companies. As men and women in society, in general, are brought up with completely different values and world views, these male-dominated locker rooms mostly have a one dimensional way of looking at things. However, good corporate governance requires a great deal of diversity at decision-making points.
ARE WE MAKING ANY PROGRESS?
Thankfully, changes are already springing up. A new law in California mandated that every public company registered there have at least one woman on its board by the end of 2019. The bill cites a study showing better business performance on stock price and other key metrics when there are women on the board. The study cited was a global, longitudinal study conducted by Credit Suisse.
A refreshing change saw 96 per cent of California company boards having at least one woman, while most of these women were not from the company but from outside.
However, the fight has to move beyond its initial stages. One woman on board has its own dangers. In no time, it can slip into tokenism. This one woman will be expected to conform to board decisions to show that she is a team player. In fact, she is expected to be a spokesperson for her gender and not an individual who has qualifications.
A long term fight would require individuals to move beyond this and adopt a more holistic approach that is very effective.