BOARD DIVERSITY FOR THE DUMBER SEX.

During an open discussion last week at the G20 Summit in Argentina, Prime Minister Justin Trudeau strapped on his “gender lens” and walked into a political flytrap. He observed through his visual device that when packs of construction workers are sent out to small communities to build pipelines and other infrastructure they tend impose “social impacts, because they’re mostly male construction workers.”

The unstated implication that male workers behave in brutish ways, simply because they are men, drew the attention of many critics. But few commentators took issue with Trudeau’s other gender-lens comments. His government is applying “gender-based analysis” to policy-making because we all need “to be smart about getting the very best out of all of our citizens and making the very best out of our economy, because women entrepreneurs tend to make better choices than others. We’ve seen it in study after study.” Trudeau did not provide the identity of these “others,” but we can surmise.

Surprisingly few people took offence at the prime minister’s suggestion that men, in addition to their undesirable social impact as workers, are constitutionally dumber when it comes to the entrepreneurial and corporate strata of our societies.

To be fair to the prime minister, the idea that men are the dumber sex has been loose in the corporate world for many years. Many market research papers have claimed that installing female corporate directors and executives makes corporations more profitable and valuable, a conclusion that is now entrenched wisdom within the salons of corporate governance. The implication is clear that boards with too many men are not as smart as boards with many women.

The head of the Canada Pension Plan Investment Board, Mark Machin, recently said “We believe companies with diverse boards are more likely to achieve superior financial performance. Research from Credit Suisse and Catalyst Inc. has shown that companies with higher female representation have delivered higher returns.”

What Trudeau, Machin and other supporters of the corporate gender diversity effort do not say is that numerous studies have also debunked the evidence that the presence of women on boards or in executive suites generates better financial results.

In this month’s edition of Financial Post Magazine, editor Andy Holloway asks the headline question: “Will adding more female directors improve a company’s results?” The answer: “Maybe not, but the pressure to do so is not going away.” The magazine’s quick analysis of the market performance of the TSX 60 shows little or no relationship with board gender diversity. Among companies in the consumer category, Saputo Inc. (with five out of 10 female directors) had a five-year market gain of 49.8 per cent, while Alimentation Couche-Tard (with three out of 11 female directors) achieved a gain of 163 per cent and Dollarama (with 2 out of 11 female directors) gained 173 per cent.

What does all this mean? Absolutely nothing, one way or another, and not just because the FP Magazine’s rough numbers were produced without the sophisticated input of a giant consulting firm or Credit Suisse Research Institute, cited by Mark Machin as an authority for the CPPIB’s plan to base investment decisions on board diversity.

Credit Suisse’s latest 2016 report on corporate gender performance is filled with categorical claims. “We find clear evidence” of greater performance among firms with women in decision-making roles. Even companies with only one female director “generated a compound excess return per annum of 3.3 per cent for investors over the previous last decade.” Imagine! Just one woman and returns jump.

Katherine Klein of the Wharton School at the University of Pennsylvania, a leading supporter of the role of women within corporations, is also a skeptic on the links between corporate performance and women on boards. She says “research conducted by consulting firms and financial institutions is not as rigorous as peer-reviewed academic research.” The link between board diversity and performance is “very weak,” she says. When academics dug into a couple of studies they found that “the relationship between board gender diversity and company performance is either non-exist (effectively zero) or very weakly positive.”

A 2015 European academic paper, “Does Gender Matter? Female Representation on Corporate Boards and Firm Financial Performance — A Meta-analysis,” found that the link was “small to non-significant.” It concluded: “Mere representation of females on corporate boards is not related to firm financial performance.”

The possibility that the research behind claims of diversity’s impact on performance might be suspect should come as no surprise. One single factor, especially one as limited in economic and business impact as the sex of a few individuals at the board level, cannot possibly cause massive changes in corporate performance.

Even if some threads of statistical correlation could be found between female directors and performance, an enormous range of other confounding factors drive corporate performance. Consumer goods cannot be compared with mining companies, retailers cannot be compared with oil firms, and many retailers cannot be compared with other retailers.

Using dubious statistics to promote board diversity, especially if supplemented by unofficial quotas imposed by politically motivated pension plans and investment advisers, could easily backfire on corporations and the people who run them. Earlier this year The Economist reported that European experiments with quotas are widely considered a failure. “Gender quotas at board level in Europe have done little to boost corporate performance or to help women lower down.”

The fundamental justification for appointing women to boards or executive positions should be merit. Using unsound statistics to enforce gender diversity on other grounds suggests we need to adjust our gender lens.