Putting women on boards will not help

CATASTROPHIC errors of judgment” by company boards are blamed in Alistair Darling’s memoirs for the spectacular corporate failures over the last few years. Bringing more women into the boardroom to shake up behaviour is being touted as at least part of the answer and Lord Davies has called for at least a quarter of the directors on FTSE boards to be female appointees by 2015. His recommendations look set to be enshrined in the official UK Corporate Governance Code any day now and female non-executive candidates like Julie Meyer, the successful founder of Ariadne Capital, have already been inundated with invitations to take up prestigious board seats.

But before we celebrate the end of history, let’s not kid ourselves that women are the panacea to poor governance. Even if you are blessed with the A-Team of diverse and capable board members, there is another elephant in the room, arguably much trickier to resolve.

Directors are not superhuman – even female ones. They face a phenomenal task: to supervise and steward vast multinationals and recent events suggest that even the executives on the board can struggle to gain the visibility they need to do the job.

I doubt we’ll hear the chief executive of UBS being in any hurry to repeat the claim he made to investors a year ago, that if something goes wrong under his watch “you won’t hear us saying we didn’t know”. If it is hard for even the most well intentioned of executives to have a firm handle on everything that they need to know, one can only imagine the challenge for the non-executive.

Poor information has been at the heart of most of the recent headline grabbing corporate crises from BP to Lehman Brothers and Northern Rock. It wasn’t that their boards displayed poor judgment in resolving their problems: they didn’t realise they had any.

Improving the quality of information available to corporate boards is one of the most powerful ways of improving board effectiveness. But our research suggests that the information boards receive is far from adequate. The official information source for the board is often a dense 300-page deck of retrospective, financial data – only adding to the fog through which directors attempt to plot the course of the company.

Adequate challenge in the boardroom cannot occur without diversity of thought (often, but not always, a consequence of gender diversity), but nor can it occur without access to the right information.Only when directors are provided with the requisite information will we see whether Darling’s charge of poor judgment is a fair one or whether Winston Churchill may have more light to shed: “Give me the tools and I will do the job”.