Clara Furse has been in banking one way or another all her working life. She was the first woman to run the stock exchange. She ran one of the other Exchanges before that. She was an MD at UBS, the bank. And she is an all round superwoman in finance. And now she is the first ever woman to be appointed to the Bank of England’s Financial Policy Committee (FPC), which “is charged with a primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system.” (my italics)
Hurrah for diversity says everyone. A woman on the Board, that’ll make the difference. No more financial crises. If it’d been Lehman Sisters, there’d have been no crash, no double dip, no austerity. Etc etc. So hurrah for Clara.
And actually who can deny her a word of personal congratulation. It’s a pretty stellar achievement. But diversity it isn’t.
Diversity just isn’t about maths. It’s not about the numbers. It’s about difference. Diversity is about more than what a black actress friend of mine calls ‘panther casting’. It’s not enough just to get some women, some blacks and some gays.
If you’re on a committee charged with “reducing systematic risk”, you’d better have a culture of challenge built into the DNA of the committee.
There’s increasingly a really interesting body of research that is asking the question whether, if you can measure the quantum and quality of an individual’s intelligence, you can measure the same in a group?
And Dr Chris Chabris from MIT and a team of researchers have come up with compelling evidence that suggests that you can. (published in Science on 29th October 2010). And here’s the interesting thing — high performing teams are not made up of groups of high performing individuals. High performing teams need diversity — of approach and identity — and the ability to manage the difference. There is also a great book called The Difference by Scott E Page that reaches the same conclusion.
Diversity is about recruiting Boards, Committees, Teams and Project groups that have a real range of external perspectives, have diversity of heritage or identity and, on top of all that, the ability to manage the difference. And it’s so much harder managing a team of real difference than it is managing a group that is all the same, whether they are a bunch of 50 year old pin striped white career City men or for that matter the same number of lentil eating, vegetarian shoe wearing, like-minded lesbians. It turns out that great minds don’t think alike. Great teams think differently.
So when Clara Furse went in front of the Treasury Select Committee they were right to grill her fiercely on one main topic. How she had demonstrated her independence of thought when it came to risk.
What raised their suspicions was her role as a director of Fortis, the Dutch-Belgian bank, which, together with RBS and Santander, made a disastrous acquisition of ABN Amro in 2007. Fortis had to be bailed out by Dutch, Belgian and Luxembourg taxpayers. And the deal so depleted the reserves of RBS that British taxpayers ended up footing the bill for it too.
Clara was a member of Fortis’ risk committee. And all she had to say on the matter was that she believed it was a “high quality, high margin, low risk” deal.
The big-brained Tory Andrew Tyrie, the MP for Chichester, who chairs the Committee wasn’t impressed. He remarked “It is vital that … the FPC’s external members should … challenge the views of those from inside the Bank and ensure the committee does not fall prey to group-think.” Which is what happened with the ABN Amro deal, where none of the RBS or Fortis non-execs appear to have challenged the wisdom of the deal.
Group think is the enemy of good risk handling. And the FPC is supposed to protect us against such mad deals as the ABN Amro deal. They are supposed to supervise banking risk. And, if Chabris and Page are right, handling risk properly and diversity are crucially interlinked. Even if Dame Clara is the first woman to be appointed, there is no diversity on the Committee. Have a look at the picture on the Bank’s site. It’s the same old, same old. Read their CVs and you just wonder where is the diversity of thought.
If Boards and Teams really want to perform highly they need to develop thoroughgoing diversity in the way they recruit and operate. It’s not enough for Clara to be a woman. Her record suggests she’s just more of the same.