Why Scottish Widows thinks boards need to "get comfortable with being uncomfortable"

The major pension provider is planning to tell the largest companies in which it invests to improve their cognitive diversity. Here's why ending groupthink matters.

by Kate Magee
Scottish Widows
Scottish Widows

Scottish Widows, one of the UK’s largest pension providers, is writing to the top 50 companies in which it invests, to encourage them to put cognitive diversity on their agendas.
 
The company, which has six million customers, will send out the letters in the coming weeks. It has made improving cognitive diversity among its hundreds of investee companies a priority over the next three years to help improve decision-making at board level.

The move comes after it found that of its top 25 holdings, only one firm publicly mentions ‘cognitive diversity’ as something it considers in its working practices. 
 
Scottish Widows defines cognitive diversity as ‘bringing together a range of different styles of thinking among members of a group.’ That can include – but is not limited to – different perspectives, abilities, knowledge, attitudes, information styles, demographic characteristics, or any combination of these.
 
The company’s new report, ‘Great Minds Don’t Think Alike’, co-authored with Dr Johanne Grosvold, associate professor at the School of Management, University of Bath, says companies must do more to understand cognitive diversity and foster a culture of ‘constructive disagreement’ within their boardrooms to make better decisions. 
 
Despite a welcome focus on improving gender and ethnic diversity within leadership positions, many companies may still be hindered by groupthink, with too many executives from similar backgrounds and similar viewpoints.
 
Indeed, the recent report by MPs into the country’s handling of the Covid-19 pandemic, claimed groupthink between politicians and scientific advisers blinded ministers to more successful early approaches taken in other countries. It claims this led to “one of the most important public health failures the United Kingdom has ever experienced.”
 
Scottish Widows’ head of pension investments and responsible investments, Maria Nazarova-Doyle, said: “Groupthink limits the potential growth of our customers’ savings in future. In order to deliver the best possible returns for customers, it’s important that boards come from diverse backgrounds, have different styles and approaches.”
 
She added: “Doing it in practice takes time and commitment, and we recognise that all companies can do better, including ourselves. As an active steward, we will engage with our investee companies to achieve better corporate governance through broader diversity and set this as the standard against which we expect those companies to perform."

"We want to foster a culture within the boardrooms of the companies we invest in of being comfortable with the idea of being uncomfortable," she said.

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