A study that 'warrants further study' is no reason to rush to regulate diversity

The Senate of Canada is back in session this week, ready to vote on Bill C-25. That’s the legislation introduced by Innovation Minister Navdeep Bains to revamp the Canada Business Corporations Act and inject more social subversion into corporate governance. Part of the bill deals with shareholders’ election of directors. Another tackles the trending topic of diversity in management, on boards and throughout the corporate system.

In December there appeared to be some chance the bill’s more extreme provisions would get amended and the bill returned to the Commons where, perchance, it might meet a peaceful demise . No such luck. When the risk emerged that the focus of the prime minister’s talking points at the World Economic Forum might end up as mulch on the floor of the Senate, the Liberal power machine shut down the banking committee’s review of the legislation. So much for the independence of the newly independent Liberal senators.

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At the Davos event, where U.S. President Trump sold America as a low-tax nation open for investment, Trudeau offered a down-with-corporations speech dedicated to genderism, diversity and intersectionality. “We have to recognize that aspects of intersectionality are always at play and require special attention,” he said. “Here’s an example: In 2016, among women who were newly appointed to the boards of Fortune 500 companies, 77 per cent of them were white. Race, religion, sexuality, socioeconomic status — these are just a few of the ways that women are even further discriminated against.”

A study that warrants further study is no reason to rush to regulate diversity

When he wasn’t playing the race/sex/religion/inequality card in Davos, Trudeau laced into corporate greed. “Too many corporations have put the pursuit of profit before the wellbeing of their workers. The gap between the rich and the poor is staggering. All the while, companies avoid taxes and boast record profits with one hand, while slashing benefits with the other. But that approach can’t and won’t cut it anymore.”

Instead, what Canada and the world need is more social corporatism. To support his gender and diversity mission, Trudeau cited a McKinsey Global Institute report as evidence that “narrowing the gender gap in Canada would add $150 billion to our economy by 2026.” He also claimed a study by the Peterson Institute for International Economics in Washington showed that increasing the number of women in leadership positions from zero to 30 per cent “translates into a 15-per-cent boost in profitability.”

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Trudeau failed to note that the Peterson conclusion came with a qualifier: “This estimate, derived from a cross-section, may well diminish if re-estimated in a panel setting and is surely subject to diminishing returns. Nevertheless, the robustness of this result from a global dataset warrants further study.” A study that “warrants further study” is no reason to rush to regulate.

The McKinsey estimate of a $150-billion gain in Canada’s GDP by 2026 is another piece of research that warrants further study. The number flows out of a 2015 McKinsey Global Institute report titled “The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion to Global Growth.” Among the McKinsey senior execs advising the hundreds of researchers around the world who worked on The Power of Parity was Dominic Barton, who now heads Trudeau’s Advisory Council on Economic Growth.

The McKinsey global report sets a global standard for policy-based evidence making. What would happen to global growth, asks the report, if women participated in the economy identically to men? To find the answer, McKinsey engaged in what the report describes as a “thought experiment” in which women have the “same” labour participation rates as men and the “same” hours worked in each sector of the global economy and are equally productive. This “thought experiment” produced a global GDP gain of $28 trillion by 2026.

But full gender parity, said McKinsey, is an “aspiration” that needed to be tweaked to something more realistic. The trimmed-down result was a $12-trillion global GDP gain.

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There were no specific numbers for Canada in the original report. So after Barton became head of Trudeau’s advisory council, McKinsey in 2017 added a Canada-only thought experiment.

The Canadian report claimed that a full gender-parity regime — same work, same hours, same productivity — could produce a GDP gain of $420 billion by 2026. That being impossible, the report compromised with the more modest objective of merely increasing gender equality rather than going for full parity. The economic modelling here is dubious. Other researchers have found that such gender-based analyses by consultants and advocates are unreliable and unscientific.

Also questionable is the proposed imposition of a rash of social-engineering initiatives, including quota settings, subsidies, child-care schemes, enhanced diversity propaganda, hiring preferences and other measures to overcome the complex social, economic and cultural structures — good and bad — that produce Canada’s current and supposedly inequitable economic divisions.

New gender and diversity rules are constantly being invented. A recent op-ed co-written by Dominic Barton suggested corporate procurement departments should expand programs that “aim to purchase from women — and minority-owned businesses.” Trudeau in Davos had more ideas. When companies are looking for a new hire they “should be identifying women candidates at a rate equal to men.” When corporations and governments need to fill appointments, said Trudeau, they should “recruit people who reflect the true diversity of our country.”

In weeks to come, the Senate will debate and pass Bill C-25, a product of the McKinsey report on Canada that promises a $150-billion windfall. We may never see the gains, but we will certainly experience the social divisiveness that is at the heart of the politics of diversity.