Friday, May 28, 2010

Gender Inequality: An Explanation for Unethical Business Behaviour?

Over the last few weeks, the topic of Gender Equality has been seen in a number of popular media outlets. It was the central theme of The Clinton Global Initiative in New York a couple of weeks ago and had a couple of very powerful speakers on the topic. Although I’m not in any way an expert, I’m intrigued by the history and effects of gender inequality when understanding some of the behaviours of business today and the winds of change characterizing business.

A few management scholars and practitioners have lumped gender equality or, more generally, diversity in the workplace under the broader sustainability umbrella, specifically in the social pillar of the triple bottom line. JP Morgan has a whole leadership program to increase the number of positions for women while Goldman Sachs has a “10,000 Women” investment initiative meant to help 10,000 women get business degrees around the world.

“We have to do whatever it takes to attract the best people….you can accomplish a lot of your personal objectives and the world’s objectives through the platform of Goldman Sachs”. (CEO, Goldman Sachs).

Is gender equality good for business then?

Calling herself a social venture capitalist, Kavita Ramdas leads The Global Fund for Women and explains that investing in equity guarantees more efficient outcomes. She explains that women have a very different sense of purpose when compared to their male counterparts, the product or at least balance of which can be very lucrative to the firm. A recent study found that banks with women in at least 30% of the leadership positions had much lower risk rates and lower rates of bad loans than were made in other banks. Clearly, firms that have employees and key decision-makers who share the same gender as 50% of its customer base generate important knowledge and perspective on how to tap into that market more effectively. What is more, ensuring gender equality affords companies access to a broader labour pool through which to achieve organizational objectives. And because gender inequality has attracted a wide range of individuals, groups, and organizations eager to facilitate change, consumer decisions are increasingly made by women. Can a male-dominated organization adequately target these new decision-makers?

Of course, businesses frame gender equality from an instrumental perspective, working to understand how ignoring or tending to this issue positively and negatively impacts their bottom line. But when we dig a bit deeper, we begin to understand some more provocative relationships between business today and gender equality.

The Wall Street Journal published an article recently trying to understand why women haven’t been as successful as men in business (bear in mind that success is rather narrowly defined in the article as growth). I was a bit surprised by the author’s two reasons put forward. One reason was the stereotypes, perceptions, and expectations of business and government leaders. The other was that women have “self-limiting views of themselves, their businesses and the opportunities available to them”. Notice that the limitations flagged in this second reason is that of the subject (women) rather than the object (business). Another way to look at this is to argue that how we define success in business today is not conducive to women. In other words, perhaps women just aren’t interested in achieving society’s definition of success in business in the same way that men are.

I’m reminded of the Hollywood film “The Da Vinci Code” where one of its underlying messages is that events and how decisions are made over the course of a period of time can have dramatic and sustained impacts in the future. If there is any truth that today’s society marginalizes women partly because of the decisions made thousands of years ago then we can perhaps argue two things. First, such marginalization may have led to the unfolding of the industrial revolution without adequate women representation. Second, we live in a society where the ripple effects of these early formations of business fail to build in the female perspective.

The Economist recently published a story highlighting how the competitive gene of men that was needed to "get the girl” may still be lurking in the shadows in explaining the competitive and cutthroat nature of males in society and business today. What does it mean if this competitive gene was not balanced by less-competitive female genes? Perhaps men are perceived to be more successful only because their perspective was more prominent in developing the notion of business and industry rather than or perhaps complementary to women’s self-limiting views or stereotypes against women as the WSJ article concludes.

Another more recent study found that the male sex drive is at the root of most of the world's biggest conflicts from gang violence to world wars. Whereas women tend to befriend when they are exposed to unfamiliar faces, men are more likely to use violence. Study authors associated this finding with the male evolutionary need to boost his chances of reproducing and the fact that men have a stronger sense of group identity. Now imagine what happens when you have a disproportionate amount of men in powerful positions such as the head of countries, empires, corporations, sport-teams, gangs and religious groups. This study implies that competing countries, teams, businesses, etc. are perceived as a substantial threat to his chances of remaining in power for what used to be reproduction but is now domination.

France is in the process of making it law by 2016 that companies have at least 40% women sitting on the board. There are of course plenty of reasons put forward to oppose this law such as the opinion that women don’t have the expertise and knowledge built over time to play these roles. But are we forgetting that perhaps there isn’t a supply of women because they don’t want to take on these roles? If the business world was developed and predicated on a very male dominating decision-making process, why would women be drawn to play such a role? And even if they were, wouldn’t they need to forego some of their values and perspective to succeed in this role? Perhaps the women pioneers will create a social movement in business that will attract more women and slowly change what business is all about.

Even still, gender inequality in business may indeed represent an important explanation when understanding the unethical behaviour of business over the last few decades. I recall reading a few years back that opposing genders of a given species represent balancing mechanisms and that if there is an imbalance in gender strength, serious side effects result. Could we then conclude that if both genders in humanity are not equally prevalent in society, negative effects like corruption, greed, climate change, and social inequity begin to emerge? Does the negative behaviours of businesses like Enron and Goldman Sachs exist because the whole notion of business was predicated on the personality traits of one gender which dominated another? Do they exist because the underlying logic of business excluded women in the early formative years and today excludes them in powerful positions because they are not interested in playing these roles or because the corporate logic is incommensurable to women? Not only are there not enough women in these positions but even in these positions women are molded to fit a system created at a time that excluded their input. This arguably snuffs their important perspective from balancing those of the opposing gender.

So what does this mean? Perhaps it suggests that ensuring more women are put in leadership positions is not the answer unless doing so influences the very purpose of business. Is that even possible? Or is there simply too much inertia that women can only be successful by adopting the behavioural traits of their male counterparts to best fit into the system?

Photo used from "India worse than Pakistan" through Creative Commons

Wednesday, May 12, 2010

Who's to Blame for the Gulf Oil Spill?

The oil spill disaster in the Gulf is of course generating much attention. Many would say that British Petroleum (BP) has been quite responsive to this spill but there have been some subtle hints of defensiveness. A couple of weeks ago, CEO Tony Hayward said, “We are responsible, not for the accident, but…for the oil and for dealing with it and cleaning up the situation”. More recently, BP, Transocean, and Halliburton Inc. were blaming each other for the catastrophe. BP owned the well that Halliburton helped build but Transocean owned the rig that caught fire and ultimately sank in a mile of water.

Arguing over who is ultimately at fault may be a fool’s errand when we look back at other major corporations trying to avoid blame by pinning the problem on others. The apparel sector in the 1990s faced huge backlash as firms like Nike and Gap avoided taking responsibility for poor labour conditions of their supplier factories. They stated that because they don’t own the factories, they have no legal basis on which to enforce improved labour conditions. This was unacceptable to fair labour groups and consumers in developed countries who quite swiftly forced Nike and others to take responsibility for its supply chain regardless of their ownership status within that supply chain. Coca-Cola played the defensiveness card when they initially denied responsibility for the Belgium contamination of 1999 and the killing of union members at a Columbian bottler. Coca-Cola has since shown a change of face by taking responsibility for their suppliers’ actions and admitting publicly that their products may be linked to obesity in children. We’re seeing similar scenarios in other industries where the expectation is that firms take responsibility for parts of the supply chain that they would otherwise ignore. The consumer electronics sector is working to reduce the use of toxic materials in their products that end up being inhaled by children in developing country children who are paid to take these components apart for resale.

If payouts represent any admittance of guilt, BP doesn’t look so good. According to the Wall Street Journal, they’ve already spent $350 million in cleanup efforts and paid out $3.5 million in initial claims to businesses along the Gulf Coast X. This is over and above the $1 million per day they are spending on stopping the flow of oil.

Whereas Exxon has been a leader in improving their operations since the Valdez spill, BP has cut costs perhaps too crudely making them ill-equipped to cope with the complexities of extracting from more remote locations like beneath the ocean floor. In early 2009, the EPA identified violations surrounding BP’s role in the catastrophic explosion and fire in March 2005 at the Texas City refinery. This was one of a string of incidents leading congressmen to question the cost cutting maneuvers of BP that led to very “dangerous operations”, yet $70 billion in profit last year. In 2007, CEO of BP America Robert Malone told Congress: "These [negative] experiences have changed BP and all of us who work for the company…We are determined to learn from what happened and to become a better, stronger company." I’m not sure much has changed.

While executives and government officials are arguing over who is to blame, there might be an important and highly neglected elephant in the room. Are there perhaps a deeper set of issues here underlying the many stories tracking this spill? Was this a freak accident that will likely not happen again or is this perhaps a signal that our technological advances in oil extraction are unable to keep up with our need to move to more and more remote locations to feed our demand? According to the CEO of BP, “The industry has been exploring in deep water for over 20 years." He added: The global industry "has drilled over 5,000 wells in greater than 1,000 feet of water and has not hitherto had an issue of this sort to contend with."

In his powerful book “Thousand Barrels a Second”, Peter Tertzakian chronicled how we reached a point where we now produce 1000 barrels (or 42,000 gallons) of oil per second globally. This means that every one of the 7 billion people on this planet consumes an average of 0.5 gallons per day. Of course 0.5 gallons per day is quite low when we consider that two-thirds of the population is living on less than $2,000 annually. Imagine what will happen when the 2 billion people living on $1-3 per day start to increase their income levels. Because of our dependence on oil, the profit incentive to keep supply steady is equally mind boggling. We can probably find petroleum in 90%+ of the products we consume from the food we eat, the chairs we sit on, the cars we drive, and the fuel to move that car.

Spending time investigating whether BP, Transocean or Halliburton is to blame may overlook a more important point that perhaps our consumption levels and overwhelming dependence on the substance has guaranteed a rather relentless effort to find the substance at its most remote locations. History may just warn of a looming set of events that would suggest these sorts of accidents will only increase. Whale oil, once the primary source of energy in industrialized nations in the 1700s and 1800s, became increasingly scarce as whales were no longer found in convenient locations. This pushed companies to hunt whales in dangerous arctic waters without the appropriate technologies and skill levels. Countless workers died and costs became overwhelming as whales were harder to find and catch. This scarcity precipitated a movement towards alternatives, one of which was rock oil. Are we facing a similar circumstance here? Is our technological prowess keeping up with the need to move to remote locations?

I recall a few years back reading part of a statement from a minister in Eastern Asia warning that there is something terribly wrong with systematically extracting billions of gallons of a substance meant to be underground. Perhaps the sheer volume of oil spreading in the gulf is a symbol of how much of the substance we are consuming as a society. Or perhaps this is Mother Nature’s way of balancing itself out. The US consumed 21 billion barrels of oil in 2008, which represents 25% of world consumption despite only having 5% of the world’s population. I can’t help but wonder whether this spill signifies how the negative effects of our behaviour, once conveniently contained, is bursting at the seams.