The New Zealand Stock Exchange is a private organisation, as are the companies who list there. If a private organisation wishes to engage in acts of stupidity, that is its choice.

But the NZX is singularly important, so such acts of stupidity deserve comment.

The NZX is requiring its listed firms to disclose their gender-diversity policies - how many women they have on their boards and, worse, in their senior management.

Academic literature supports that diversity improves performance at board and senior-management level. This is true, but these studies also show that this improved performance does not improve profits.


An excellent study by LSE economists Renee Adams and Daniel Ferreira in 2008 showed women directors exercised greater oversight and diligence and had better attendance records. However, despite (or because) of this they reduced the performance of firms with good governance prior to their arrival, although they were beneficial in poorly managed firms. Generally, there was no discernable effect on the bottom line and this was in an environment with no diversity programme.

Other studies have shown that gender diversity reduces stock values as investors shy away from female-dominated boards. Worse, social identity theory indicates gender and racial diversity can actually hinder a group's dynamics.

On the other hand, there is considerable evidence that diversity in discipline does aid performance. Ten accountants make up a less effective problem-solving group than five accountants and five engineers.

But despite this I can live with a requirement of director diversity. A competent board can carry a few token girls but management is a different prospect, as anyone working for an incompetent manager can attest.

The NZX received a number of self-serving submissions on the topic but the worst was from the NZ Shareholders' Association, which was in favour of this nonsense. Shareholders should care about the performance of their business, not their director's anatomy.

But why the focus on gender diversity? We have had Helen Clark, Jenny Shipley, Theresa Gattung, Dame Silvia Cartwright and we still have Sian Ellis. The glass ceiling has been battered pretty hard.

Why not focus on racial diversity? How about ensuring gays are represented in senior management, left-handed people, redheads and ex-cons? We all deserve a go, no matter our unsuitability.

Publicly listed entities face a number of burdens that their private cousins do not, and shaming them into promoting second-rate managers is poor policy.


Prejudice is also bad economics. Firms that do not employ the best candidates will suffer against those who do. That is how the invisible hand works; the NZX should get out of its way.