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Wednesday, 17 February 2016

Is a lack of supervisory board diversity holding back the world’s leading port operators?

Oliver Helvin, senior associate at KWR, explains how a lack of board diversity and corporate governance might be holding back terminal operators.

It’s easy sometimes to believe that the international ports operating industry exists in a parallel universe outside of the visible public domain.

This certainly seems to be the case when it comes to gender or skills diversity at the senior levels of management.

How else can you explain the near-total absence of women on the supervisory boards of the world’s largest ports operators and the lack of reference to even using the word “diversity” in most operator’s annual reports?

When reviewing the supervisory boards of the leading port operators it is surprising and disappointing too see a lack of women sitting on any of these boards. Can any other industry, a decade and a half into the twenty first century, claim this level of men-only exclusivity?

The picture is little better one step down the corporate ladder. At the top levels of executive management in the world’s largest ports operators, six women are to be found however all of them in non-operational roles.

Can it really be the case that women are somehow genetically unable to perform senior operational roles in the ports industry?

If not, then surely the time has come to ask what is going on? Why are women in the ports industry not kicking down the doors that have remained closed to them, as they have in virtually every other industry over the last thirty years?

The answer, of course, lies in accepting that a prevailing, industry-wide culture exists, one that’s collective mind-set is: “if it ain’t broke, don’t fix it”. Put simply, the ports industry has not felt impelled to look for new ways of doing things, because the old ways, while times were good, seemed to work just fine.

This culture, it goes without saying, has prevented not only women from holding management roles in the ports industry - rather it barred from entry anyone who has not worked their way up through the operational ranks.

Corporate Meeting

The result has been organisational stasis, from the top down.

Take, for example, the last thirty years, cargo ships have doubled and tripled in size yet the terminals ability to support these larger vessels has not kept up with the same pace and moves per hour have largely remained constant.

It seems the ports industry is happy enough to buy innovation but unless all the elements in the supply chain process work as one then the drive to innovate is simply not cost effective to management. To my mind, that is a failing.

As Jens O. Floe a senior ports industry official said to me recently: “The fundamental challenge to diversity in our industry is the misperception of companies, which have been trying to reduce risk through hiring people from the traditional shipping and port industry. This has resulted in a lack of diversity within both gender and ethnic background on senior and board level.

“We have created a chicken and egg situation. How do you break this cycle, if we only employ people and select board members, who have been trained to do things a certain way? To foster innovation and promote R&D we will within the industry need to prioritise differently to allow more diversity or else innovation easily becomes the “last” priority which means that new solutions seldom gets implemented, resulting in missed opportunities or destruction of shareholder’s value.”

Today, times are not so good for the ports industry. Container rates, oil prices and cargo volumes are all, simultaneously, being squeezed aggressively. It is harder than it has been for decades to turn a profit. Jobs are on the line and operators face making large-scale operational changes merely to survive.

But out of crisis, opportunity arises. The ports industry now has a wonderful chance to explore the notion that doing things differently might just equate to doing things better. Greed alone, as it so often is, should be a sufficiently strong motivating force to innovate.

It is vital, however, that this innovation begins at board and senior management levels, in order that the effects can be felt immediately throughout organisations.

That will necessarily mean embracing diversity - both gender diversity and professional diversity – and bringing into management people from a wide variety of backgrounds with the intention of finding better ways to run ports.

Harnessed properly, we have seen in all industries that diversity can be a powerful force for progress and creativity. It can give companies the cutting edge. There is no reason this should not be the case for the ports industry.

Today, we see the most dynamic companies in the world are those that have looked beyond their traditional recruitment networks to source the best available talent.

At board and senior management levels, these companies understand that the need for boardroom diversity is real.

Outside of the ports industry, modern boards no longer comprise only people from the same social, ethnic or professional backgrounds. A fresh outlook requires a fresh perspective. In the boardroom, this means embracing diversity.

For the ports industry, changing a longstanding mind-set that hampers diversity will not be the work of a moment. It will take time and determination. While it is easy for any organisation to claim it welcomes new voices, the reality can be, at first, overwhelming.

Difference of opinion at board level, for boards not used to hearing the view of anyone but the chairman and one or two trusted lieutenants can seem mind-blowing. But in a difficult economic climate, dissent at board level is often exactly what is needed.

A board where everyone agrees with what the Chairman says runs the risk of being unanimously committed to the wrong approach, or - put more simply - of allowing the blind to lead the blind.

As an approach to governance, this approach is ultimately self-defeating. It is certainly no way to protect shareholder value. And, of course, it makes innovation impossible.

For the ports industry to emerge from the current economic reality robustly and well prepared to capitalise upon the opportunities of the future, it is vital that different voices are now heard.

New ideas and thinking are required, be it to improve the rate at which containers are taken from the ship to the customer, or to build new port infrastructure, or to find and tap new markets.

Creating board and senior management diversity can unlock vast potential, creating a better future for everyone – employees, consumers and stakeholders.

It is time the ports industry enjoyed the benefits and competitive advantages diversity creates. A financial crisis, in this respect, is too good an opportunity to pass up.

Oliver Helvin is a senior associate at KWR http://www.kwrmea.com/

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