If it’s so great why do we need a law?

UK Listing Rules dictate that a minimum of 40pc of board seats should be held by women. At least one senior position, such as the chairmanship or chief executive role, should also be held by a woman.

The listings rules work on a comply or explain basis, meaning that companies are not forced to hit the 40pc gender diversity but must explain why they have fallen short if they do.

The argument has been that such diversity increases the profitability of a company. Could be true, certainly - having diversity in management could lead to a greater understanding of the diverse desires of the population and so to making more money. But as with oh so many contentions this is something that might be true, might not be.

The thing being that there’s no actual evidence that it is true. The best we get from the Norwegian experiment is “Furthermore, nothing indicates that the quota policy has negatively affected the running and profitability of firms” and an absence of direct harm is not the most ringing of endorsements.

The recent American experience with Nasdaq is not hugely informative. For the overturning of the insistence is only a court ruling that the exchange doesn’t have the legal power to so insist rather than an evaluation of the effectiveness.

The thing is we really do think that capitalists are greedy. They’d like to increase their profits. So, if gender diversity does so then they’ll do it once they’re apprised of the possibility of improving their profits in that manner. That is, we don’t, in fact, require a law or even a rule. It’ll happen jus’ ‘coz it’s good, see?

Which does have an interesting logical conclusion. Those insisting upon the law, the rule, must be those who think that it does not, in fact, increase profitability. For if they thought it did then they’d not be arguing for a law, would they?

Tim Worstall