Boc's Macklem breaks `groupthink' inertia by diversifying leadership
Bank of Canada governor Tiff Macklem followed through a promise to make his senior leadership team more diverse, elevating former U.S. Federal Reserve economist Sharon Kozicki to Governing Council from the rung of advisers that sits just below deputies on the organization chart.
“The bank has long benefitted from Sharon's thought leadership on monetary policy design, implementation and communication,” Macklem said in a press release on Wednesday. “Her intellect and expertise will make an important contribution to our Governing Council deliberations and help ensure we take decisions based on diverse perspectives to fulfil the bank's mandate now, and in the future.”
Kozicki, an Ottawa native who joined the Bank of Canada in 2006 after working as an economist with the U.S. Federal Reserve's Board of Governors in Washington and as vice-president at the Kansas City Fed, is held in high regard both inside and outside the central bank.
Brian Depratto, a former economist at Toronto-dominion Bank, called the selection an “excellent choice.” Glen Hodgson, former chief economist at the Conference Board of Canada, called the promotion “fantastic” and “richly deserved.” Kozicki led the Canadian economic analysis department between 2010 and 2013, when she was promoted as an adviser by former governor Stephen Poloz. She currently is secretary to Governing Council. Her term as deputy governor begins Aug. 2.
There's more to Kozicki's promotion than adding intellectual heft to the Bank of Canada's leadership group. The appointment also represents some creativity on the part of the governor, who decided this spring to become a stronger advocate for diversity, while at the same time leading a policy committee comprised of five white men with similar backgrounds.
Part of the issue was the inability of the Bank of Canada's board of directors and Finance Minister Chrystia Freeland to settle on a replacement for Carolyn Wilkins, the former senior deputy governor who retired in December. That void was finally filled last week, eight months after Wilkins announced that she was advancing her departure date, when Freeland appointed banking regulator Carolyn Rogers as Macklem's new second-in-command.
However, Rogers, who currently is running the Basel Committee on Banking Supervision, a key maker of international financial regulation, wasn't available to start until mid-december. That created a scenario in which those five white men — three of them graduates of the same university — would determine the Bank of Canada's post-pandemic interest-rate policy for an entire year. It would have undermined the credibility of the governor, who in May told a virtual audience of university students that diversity helps organizations avoid “groupthink,” which “happens when decision-makers all have similar backgrounds and approach problems in the same way.”
Macklem might have succumbed to inertia and let Rogers's appointment stand as his answer to creating a more diverse set of deputies. Instead, he broke with convention and expanded the Governing Council, at least temporarily. When Rogers joins in December, there will be seven deputies until someone retires.
“This will allow for a broader diversity of views and analysis and will allow for smooth succession in the event of future retirements,” the press release said.
If diversity of views and analysis is rising in importance, Macklem and his board of directors might have to consider sticking with the larger policy committee.
The economics profession is overwhelmingly white and male. That makes recruitment difficult, especially when banks, investment funds, and other financial institutions are also scrambling to address diversity issues. The latter group is offering far more lucrative pay packages than the Bank of Canada, narrowing the pool of qualified candidates that much more.
One answer is to promote from within, as Macklem did with Kozicki, a talented economist who long ago committed to public service. Another would be to expand the Governing Council to include external members who serve in a part-time capacity, which is what the Bank of England does to raise the quality of debate over its policy direction.
But for now, Macklem has found a way to avoid the indignity of leading the only major central bank where policy was set by an all-male committee. It's progress.