Articles from Cass Knowledge

The EMBA: From the classroom to the boardroom

Coming from a non-finance background, I was surprised when the Corporate Finance module took a reflective turn. One of the sessions turned to the lack of diversity in the Boardroom having a negative impact on maximising shareholder value.

The value to bring people together –from different cultures, background and perspectives– to encourage diversity of thought is not a new concept. But it is Lord Davies report of February 2011 which resulted in a tacit target that women should make up at least a quarter of FTSE 100 board membership by 2015; and Sir John Parker’s review of 2014 on whether company boards were keeping pace with the UK’s diverse workforce which have continued to make deadlines.

By 2016, the Female FTSE Report written by academics at City, University London, Cranfield University and Queen Mary University London, showed the percentage of women on FTSE 100 and 250 boards had increased to 26 per cent and to 20.4 per cent, respectively.

Sir John Parker recommended that companies should implement structures to help promote black and ethnic minority employees to the top; and all FTSE 100 firms should appoint at least one director from a minority background by 2021, and FTSE 250 companies to do similarly by 2024.

It was therefore heartening to read in the FT this month, that 27 investors, with £10.5tn of assets, announced they were committing to “engage actively” with companies that do not make progress towards the 30 per cent Club’s target of 30 per cent of women on FTSE 350 boards and in senior management at FTSE 100 companies by 2020. The signatories include Japan’s Government Pension Investment Fund, the world’s largest pension fund, and other leading global investors such as JPMorgan Asset Management and BlackRock.

It appears that the business case for gender diversity has been made –investors are actively engaging to ensure that companies that don’t have sufficient representation of women and BME are making progress towards targets.

Adding to this fervour are the new rules requiring Europe’s largest companies to disclose their boardroom diversity policies. These polices have the potential to reshape investors’ asset allocation decisions, according to market analysts. There are investment products which are being indexed to companies’ equality criteria. This means that there is a real risk for investors not taking diversity into account; and companies need to be cognisant that diversity may have a real impact on their performance.

And indeed, this is supported by a McKinsey study, published in 2015, of large publicly listed companies which found that those in the top quartile for diversity were 15 per cent more likely to produce better returns than their local peers.

Bringing this back to my cohort, we have debated and discussed challenges –as well as positive developments that we are facing in our workplace– to bring real examples to apply the theory to. Therefore, this has not been esoteric pontification about some abstract state that one cannot relate to. As a group of future leaders, we are testing and learning how to adapt and challenge confidently. It is our diversity that is our underpinning strength and we are gaining a richer EMBA experience for it.

Radhika Narasinkan
Executive MBA (2019)