This article was written for Workplace Law Network
One issue highlighted by the economic crisis has been the significant underrepresentation of women in the boardrooms of the UK’s publicly quoted companies. While this is an unacceptable state of affairs, the realisation that something must be done to redress this imbalance is clearly a positive thing.
The report entitled ‘Women on boards’ published by Lord Davies in February of this year, has put the issue firmly in the spotlight, setting out a number of compelling reasons why there should be more women on boards, including:
- evidence that companies with the highest representation of women on their boards actually achieved, on average, higher financial performance than those companies with the lowest representation;
- gender-balanced boards had a greater focus on corporate governance;
- as around 60% of university graduates in the US and Europe are women, and women represent almost half of the workforce in the UK, there is potentially a massive untapped resource of qualified female candidates for board roles; and
- women make around 70% of all household purchasing decisions, meaning that companies are failing to represent their largest target audience.
Lord Davies made ten recommendations in the Report, ranging from amendments to the UK Corporate Governance Code, requiring listed companies to establish a boardroom diversity policy, to recommending that there should be more transparency in the recruitment process with periodic advertising for non-executive positions. Perhaps the most widely-publicised of the recommendations has been the introduction of voluntary targets for female board representation. The Report recommended that by September 2011, chairmen of all FTSE 350 companies should announce targets for the percentage of women they aim to have on their boards by 2013 and 2015. The minimum goal for 2015 for FTSE 100 companies is 25%, with one-third of all new board appointments being women. The target for FTSE 250 companies will be lower as they tend to have smaller boards; however, the one-third rule will still apply.
The publication of the Report is undoubtedly a step in the right direction, and there have been some tangible signs of progress. Recent research shows that since the introduction of the Report, the number of women hired for boardroom positions in FTSE 100 companies has doubled. The formation of the ‘30% Club’, a new organisation whose members (including a number of very influential businesswomen and men) pledge to surpass Lord Davies’ targets on a voluntary basis, has also attracted much positive press attention.
That said, there remain a number of key factors which must be addressed in order to ensure not only that more women become quoted company directors, but that they are viewed as strengthening boards rather than simply making up the numbers:
- women must stop undervaluing their skills a factor acknowledged in the Report. Though a generalisation, there is a real perception that men are more likely to apply for positions for which they do not necessarily have all the required skills, but women in the same position would not. Talented women must not be shy to throw their hats in the ring for vacant board positions.
- more men have to throw their weight behind this issue for it to gain support in the wider business community. For example, Richard Branson declared that he would like to see the implementation of government mandated quotas, and is pushing for all companies in the Virgin Group to exceed the current target of 25%. He even went as far to say that he would be happy for a government quota to be set as high as 40%.
- nomination committees must spend more time searching for qualified female candidates and take the issue of diversity in the boardroom more seriously. More transparent advertising procedures should also assist companies in moving away from the view that board appointments are made on the basis that it’s not what you know, it’s who you know.
- head-hunters and recruitment consultants have to take more responsibility for putting female candidates forward for board roles. Companies rely heavily on recruitment consultants to present them with the best candidates, both male and female, and may take the view that they are paying a large fee and so must be getting the best person for the role. This may not always be the case.
- training and mentoring for all directors, male and female, should be enforced to ensure good corporate governance and quality of board performance overall.
If meaningful progress can be made in these areas, there is no reason why the proposed targets for women in the boardroom cannot be reached, or ideally exceeded, with appointments based on merit, not simply on gender.