Corporate Governance, Representation and Diversity

Events over the last few months might lead us to conclude that the tide is going out on equality, diversity and inclusion. Gains made are now being rolled back. In the United States, government agencies are investigating Kindergarten policies, university campuses and most recently Disney among others for ‘promoting diversity in a manner that does not comply with government regulation’. Many contracting parties with US government offices have received demands to abandon their EDI work, including those outside the United States. Even Stockholm’s planning office has received communications from Sweden’s US Embassy demanding that it abandon its EDI initiatives, contrary to Swedish law.

Closer to home, in the last few weeks we have had the UK Supreme Court’s ruling on the definition of ‘woman’ within the context of the Equality Act (UK) 2010 which is nicely analysed here. Law is institutionally reliant on and reinforces social configurations around metrics and classification, in the case of the Equality Act, towards protection for named categories of person. This inevitably means that law acts to contribute epistemic resources to some people and in equal measure withdraws them from others, inevitably favouring some experiences and standpoints over others. People, in other words, can be invited to or denied access to words and phrases that help them describe their experiences and standpoints. Law gives these – rarely exact – descriptors substance and social heft but it can also set boundaries on who may legitimately deploy them.

In Ireland, the push against equality from the higher echelons of government is more subtle but nonetheless, still noteworthy. The new Irish cabinet has come under sustained criticism for the failure to appoint a more balanced cabinet. With only three ministers (and an additional six ministers of state) who are women, the percentage of women in the Irish cabinet has fallen to 24%. This is unfortunately on track with the global trend, with 23.3% of cabinet positions worldwide filled by women. We are not constitutional scholars, nor even public lawyers (for a great analysis from this perspective see Jennifer Kavanagh’s piece), but we teach and write in the broad space of corporate governance. Corporate governance scholarship brings a distinct lens to this issue, foregrounding accountability, power dynamics and decision-making frameworks within complex organisational structures.

Corporate Governance, broadly speaking, focuses on the behaviour of an organisation, how it is held accountable, transparency and fairness in its operations, legitimacy of its activities and its responsibility for and to an ever increasingly number of issues and stakeholders. As such it is the study of the rules, processes and regulations by which an organisation is directed and controlled. It also draws in the implicit and informal factors that drive how formal accountability mechanisms processes are construed, are enforced and sometimes are evaded. As we are now discovering with EDI the success and even meaning of formal mechanisms relies heavily on the disciplinary effects that emerge from informal cultures and dispositions.

Corporate governance discourses are relatively narrow compared to society at large but as the UKSC case showed, how diversity is reconceived and managerialised as a matter of classification and metrics becomes more salient when hitherto excluded groups seek to use existing epistemic frameworks towards inclusion and when those frameworks become closed to them. In this context we are interested to see how the requirements of corporations based or operating in Ireland might compare or contrast with the current cabinet composition.

Corporate Governance in Ireland

Corporate Governance in Ireland follows the Anglo regulatory model of ‘comply or explain’ that emerged from the Cadbury Report into the Financial Aspects of Corporate Governance. This is mostly due to historic, economic, social and business ties with the UK but also, in later years something of a pushback against the comparatively more tightly regulated EU model of corporate governance. The ‘comply or explain’ model means that corporations must comply with the requirements of the code (in this case, and from the 1st January 2025, the Irish Corporate Governance Code 2024) or explain why not in their annual reports, when they fail to do so. The introduction of the Irish Code is a departure from traditional corporate governance in Ireland, which prior to this followed the most recent UK Corporate Governance Code and supplemented with an Irish Corporate Governance Annex. The Irish Code (herein the Code) follows five main thematic areas:

1. Board Leadership and Company Purpose
2. Division of Responsibilities
3. Composition, Succession and Evaluation
4. Audit, Risk and Internal Control
5. Remuneration

Board Diversity

We are particularly interested in the Composition of the Corporate Board which is part of the third theme of the Code. Board composition has been a pivotal area of discussion in Corporate Governance more generally, initially focussing on the balance of executive and non-executive (also known as independent) directors (as a result of both the Cadbury Report but also the later Higgs Report) but latterly (and as a result of several reports including the Davies Review (UK) on gender and the Parker Review (UK) on race) more encompassing on the value of a diverse board. Whilst these reports are focused on the UK and the FTSE, that Ireland followed the UK Code until this year, reinforces its relevance here (until further research is carried out on the Irish position). The recommendations of these reviews is that 25% of the board should be female (in FTSE 100 companies) and a minimum of 1 director should be from an ethnic minority background. These targets represent the floor, not the ceiling, of diversity.

When we teach board diversity, our starting point is the work of McCann and Wheeler. They address the business judgment approach to gender diversity: i.e. having a diverse board is good for profits. This was traditionally the argument put forward reflecting shareholder primacy approaches to corporate governance (for a nice critique see here). We should note here that this is the approach that IBEC take, citing this McKinsey report on diversity leading to better financial performance. However, McCann and Wheeler’s research finds that having a diverse board has no impact on the bottom line. They argue rather that diversity is a good in its own right. A diverse board is good in other words because it is the right thing to do. This view would be reflected and even extended in the Norwegian experience – which introduced gender quotas in 2006 (after a two-year grace period). Research has demonstrated that with boards now gender balanced in Norway (thus the legislation was a success in terms of company diversity) the broader social impact of the quotas lies less in the economic benefits to the individual firms and more in how it has influenced a focus on diversity in other parts of Europe.

So: how does this play out in the Irish case? As in the UK, Principle L of the new Irish code stipulates:

Annual evaluation of the board should consider its performance, composition, diversity and how effectively members work together to achieve objectives.

Some provisions unpacking this principle inform. These include:

23. The company should have a diversity and inclusion policy with regard to gender and other aspects of diversity of relevance to the company such as, age, disabilities and educational and professional background which should include measurable objectives for implementing such a policy. The board should monitor the implementation of this policy and keep it under review annually to ensure it remains fit for purpose.

24. The annual report should describe the work of the nomination committee, including:

• the process used in relation to appointments, its approach to succession planning and how both support developing a diverse pipeline;
• how the board performance review has been conducted, and a summary of the main outcomes and actions taken;
• the diversity and inclusion policy and any related initiatives, their objectives and link to company strategy, how they have been implemented and progress on achieving the objectives; and
• the gender balance of those in the senior management and their direct reports. (Emphasis added)

For those not familiar with the language of corporate governance reports, this might seem vague. It is, and deliberately so. Corporate Governance being a set of best practice guidelines, models on how to behave tempered with the requirement of reporting. Corporations with less than the Davies’ recommended 25% quota on gender equality can point to their diversity policies, their processes to enhance diverse succession planning and to talk about their progress towards objectives. It maps diversity as a journey. On the flip side, in requiring an annual report on the gender balance of those in senior management, requires an annual reflection on that journey and an account of how an organisation is working towards better results (if required) in that space.

Corporate governance offers lessons in how epistemic resources around inclusion, exclusion and diversification are reconfigured as managerial imperatives and metrics. It promotes an awareness of diversity as an issue to be addressed, to be reflected upon, and to be cognisant of in any recruitment practices or indeed policy development within an organisation. In so doing it can open spaces for hitherto marginalised people. It purports, in the ‘business case’ argument at least, to offer diversity as a ‘value-added’ where new voices bring new perspectives and so may offer new routes to profit. At the same time, as well as narrowing the grounds for what counts as valuable, corporate governance does not offer answers to or innovation towards who gets access to the resources that diversity discourses offer. Metrics are in a sense Janus-faced (or even – given the nature of this blog, and to conflate our ancient mythologies still further – resembling the Cailleach). They are actionable and thus essential if formal accountability mechanisms are to be imposed. At the same time, they pull our attention away from diversity’s informal, cultural heart: that social actors, whether public or private, expand access to and attention to human experience writ large.

What does this mean for the Irish Cabinet?

Article 28 of the Constitution sets out the composition of the Cabinet as being between 7-15 members appointed by the President. Much like the early reports and reviews from Cadbury, Hampel and Higgs in the UK on corporate boards, this constitutional requirement is numerically based. Indeed, this is to be expected given the date of its publication. Society has evolved. Ireland has come a long way in terms of promoting diversity. It has become a much more open, diverse and inclusive society from the one that required women to leave the workforce when they had children. And yet, the subtle legacies of a male-dominated government remain. When the initial outcry over government appointments was made, the Taoiseach and Tánaiste were going to try (emphasis added) to resolve the issue with a cabinet reshuffle. This did lead to an additional female minister appointed. But it is disappointing, first, that it took an outcry to even raise this as an issue, and second that a performative additional one female appointee was deemed an acceptable solution. Where are the commitments to a sustainable approach to diversity in government? We recommend that due consideration be given to (if not quite a constitutional amendment on cabinet composition), policy commitment to diversifying the voices in the cabinet and addressing how political parties and infrastructure can (from grass roots) better enhance the pathways to leadership for women as well as those from ethnic minority backgrounds. Indeed, the UN Women recently updated its methodology to measure women’s representation in cabinet positions. We believe that in raising awareness of gender (and equality, diversity and inclusion more broadly) will avoid performative and reactionary responses to gender imbalance but rather require reflection and introspection as decisions are being made.

As set out at the start of this blog, the percentage of women in the Irish cabinet has fallen to 24%. It is not meeting the minimum standards of board diversity required of companies based in Ireland (whilst meeting the relevant profit threshold). Though a corporation and a government are fundamentally different entities, both must critically examine their internal composition in relation to representation and diversity, as this speaks to their legitimacy and capacity to serve the public or stakeholder interest effectively. Government is very well placed to lead on diversity in its most expansive sense. Governments are empowered to introduce (and work based on) formal mechanisms that open social institutions to those who may otherwise be marginalised. They are also best placed to speak into diversity as an expansive celebration of human being. In so doing they may help ensure that, instead of delimiting them, formal diversity mechanisms offer a language towards inclusion to the people who most need that language. With government leading the way, other institutions – corporate and beyond – will follow.

Dr Marisa McVey is a lecturer at Queen’s University Belfast. Her research critically examines current and potential mechanisms of corporate accountability for human and environmental rights and imagines alternatives for a just transition to a sustainable and equitable society. She is currently working on projects related to human rights due diligence (HRDD) practices.

Ciarán O’Kelly is a reader in Law in Queen’s University Belfast. He is primarily interested in accountability and governance. Within this his research interests range from business and human rights to law and technology.

Dr. Ciara Hackett is a Reader in the School of Law at Queen’s University Belfast. Her research cuts across Corporate Social Responsibility (CSR) and Business and Human Rights (BHR). She is currently working on a project which theorises how the conciliatory corporate language used in legal policy and guidelines within BHR risks downgrading how corporate actors understand their responsibilities to human rights.