Recently, the issue of gender on boards has become a topic of much debate. To be honest, if we think realistically about any company executive of a high profile company and their direct subordinates, we typically see this picture- white, middle class male! So, in an age where equal rights and issues of gender discrimination are prevalent, it is not surprising that this issue has come to the forefront of many business debates. The issue is also topical given the fact that Lord Davies who compiled the report ‘Women on Boards’ in 2011 stated that “At the current rate of change, it will take 70 years to achieve gender balanced boards in the UK.” The percentages as reported in 2011 of women on FTSE 100 boards was a mere 12.5%. The percentage of men is 87.5%.
In the UK today, women are advancing and progressing more and more. We have seen an increase, albeit minimal in the number of women in influential positions such as MPs. So why has this not translated onto boards? Surely in any positions of influence, it is a good idea to have a representation from the community or demographic that the organisation serves and in the majority of cases, major companies are offering services to both men and women. Should this then not dictate that the boards reflect this?
Questions may be raised as to why, if for so long men have dominated the board room and companies have thrived, then why does it make any difference if women and the views of women are now represented on boards? The Prime Minister David Cameron said at a summit in Sweden in 2012 that he has not ruled out introducing quotas to ensure that more women get top executive jobs but should it take parliamentary intervention to make the change? When Lord Davies report intimates that “Companies with more women on their boards were found to outperform their rivals with a 42% rise in sales, 66% higher return on invested capital and 53% higher return on equity”, unless there is a significant change, would it make economic sense for the government to implement quotas especially in a time of such austerity?
How much does this really matter? Section B.2 of the UK Corporate Governance Code- Appointments to the Board states that “There should be a formal, rigorous and transparent procedure the appointment of new directors to the board.” The Supporting Principle highlights that due regard should be given to the “…benefits of diversity on the board, including gender.” The code offers guidance with which companies are required to “comply or explain.” Chairmen are encouraged by the Code to report annually on how principles on the role and effectiveness of the board have been adhered to. So, the guiding document for governance practitioners itself outlines and highlights the need and importance for considering gender when appointing to boards.
The introduction of quotas, encouraging positive discrimination could however lead to a number of problems arising with board composition and overall performance. For example, as women are not ordinarily in the most senior leadership positions within companies, it is possible that welcoming them onto boards could exclude more competent men from attaining the positions. This is just one of the opposing arguments in the 2010 Storvik and Teigen report ‘Women on Board- The Norwegian Experience’. The report itself raises questions as to whether or not the imposition of a quota presents issues of discrimination within itself.
In reality, there are various issues that preclude this debate. Loosely, women have to take time out of their careers to raise families and subsequent to this, many of them reduce their working hours and commitments to be able to continue in this role alongside developing their careers. This break in their career development could contribute to the lack of women that currently serve in the most senior leadership and executive positions. Conversely, there could merely be discriminatory attitudes that prevail within organisations that are not challenged and so have allowed this to perpetuate.
Regardless of the causal factors, what is clear is that in a society where diversity is everything is a strand that runs through everything, the same principles must translate to the seemingly hidden places. We must do more to include and train and develop young women and women who are in middle management positions to achieve the highest positions in companies.
Our challenge to you as a CEO, director or business owner is to seek opportunities to engage women around you with the potential to be the next leaders and welcome them onto your boards.
Until next time!