Way back in 2012, the European Commission proposed legislation to transform company boards. The aim was to boost the presence of women on company boards to 40% by 2020
In 2013 the UK proudly announced Corporate UK was moving forward with the news that 2400 city financial firms needed to implement a management diversity policy, with larger institutions being ‘obliged’ to reveal, in writing how many women will sit on their boards.
While the UK is yet to implement a strict quota on female board positions, the coalition is pushing for businesses to ensure that 25% of board positions are occupied by women by 2015, or face strict quotas.
The UK is required, by the terms of the EU banking directive, to implement diversity changes. In many ways the financial sector is leading the way to change.
Change, however, is coming too slowly according to one MP. In the June 17.14 issue of the Huffington Post, Labour MP Meg Munn again reminded the UK Government that we still need more women in business. It is a timely reminder.
Like many advocates for diversity on UK boards, Munn is all too aware that prime minister David Cameron planted gender equality firmly on his parliamentary to do list when he came into office. In response, the Business Innovation and Skills (BIS) department set corporate boards a target of achieving 25% female representation by 2015.
Cameron is well aware of the significant differences between countries as to the percentages of women who make up top corporate boards. Several European Union member countries have already introduced gender quotas for women on boards. These include, France, Italy, Belgium and Spain. Other countries have gone one step further to insist upon an improved gender balance in boardrooms. Norway, a non-EU country, is an example of a forward-looking state. They have already achieved 40%.
While banking may be taking a kick at glass ceilings, it would be wrong to suggest they are pioneering change. It must be remembered that large banks and investment funds have been virtually forced to set targets for the number of women on their boards, and that the European Commission has dropped quotas in favour of self-regulatory 40% objectives.
In November 2011 Deloitte published an interesting survey, Women in the boardroom: A global perspective. Essentially it was a global overview of current legal and regulatory initiatives around the world designed to increase the number of women serving on corporate boards.
The survey revealed a range of differing attitudes and approaches, for instance China has no current quotas for women on boards or in senior management positions. China’s Corporate Governance Code does not mention gender as a desirable quality or background to board candidates. A sample of 97 companies revealed only 8.5% of women on Chinese boards.
On the other hand, India proposes to make it mandatory for companies with five or more independent directors on a board, that at least one should be a woman. However, the Deloitte survey showed only 4.8% of women on boards in their sample.
Things appear to be changing, albeit slowly with two notable exceptions – the USA and the UK.
In the USA, gender diversity on the top corporate boards, such as the Fortune 500, had plateaued at 15% for the past five years. Similarly in the UK, according to statistics collected for the Female FTSE report, the number of women on the FTSE 100 boards has plateaued for the third year running at 12%.
According to the BIS there are 48 all-male boards and female representation in boardrooms is running at 15.6%. Equally, there is also a disparity between the numbers of women holding executive and non-executive directorships.
In her blog, Meg Munn highlighted that it is not just at director level that women are in short supply, “Recent estimates show that just 19% of our small and medium enterprises (SMEs) are majority women-led. These women-led SMEs make a staggering £75 billion contribution in terms of Gross Value Added benefit to the UK economy.
“Shockingly the gender pay gap still exists, with women paid up to 20% less than their male counterparts. How can female employees feel valued at work, or have a sense of self-worth, if male colleagues receive much more pay for similar work?” A telling indictment of how slow governments move and business evolves.
If Cameron wants to make a difference, and wants to achieve this without resorting to the quotas that are now law in Norway and France and are being phased in by Spain, he needs to get this on to the election agenda now. This is a votes issue.
I fully endorse the comment made by Anne Franks, chief executive of the Chartered Management Institute when she highlighted two issues, namely, the lack of women in the talent pipeline, combined with the fact that too many women opt out and do not realise their full potential because the culture puts them off.
Allow me to remind all those all-male institutions of something that Charles Darwin has been credited with saying. It went something like this, ‘ It is not the strongest or the most intelligent who will survive, but those who can best manage change.’
Cameron has taken some positive baby steps. A first was the commission of reports to identify what the government could do to increase the number of women on boards in Corporate UK. As a result, Lord Davies was tasked to lead a review (Women on Boards) into how obstacles can be removed to allow more women to reach board level positions in organisations.
The review recommended that UK listed companies in the FTSE 100 should be aiming for a minimum of 25% female board member representation by 2015. It also recommended that FTSE 350 companies should be setting their own challenging targets. Lord Davies called on chairpersons to announce these goals within six months of his report.
Cranfield University published a six-month progress report detailing the developments made following the Lord Davies recommendations. The report found that 61 of the FTSE 100 companies had responded to and, acknowledging that gender diversity is an issue, with 33 setting themselves the target for the percentage of women they aim to have on their boards.
The executive summary to Cranfield’s, The Female 2010 FTSE Board Report – Opening up the Appointment Process, identified a barely perceptible change in the representation of women in leadership positions to UK PLC’s top 100 companies. Overall the percentage of women on UK boards was 12.5% showing a three-year plateau with only 13% of new appointments going to women.
Given the stagnation of women on boards, the report offered five key recommendations to chairmen: –
1. Strengthen the new principle on diversity in selection to “comply or explain”. Any chairman with less than 20% women on their boards and executive committees needs to explain why this is the case in their annual reports. This should apply to all FTSE 350 listed companies. The 20% should be reviewed in three years’ time with a view to lifting it to 30%.
2. Advertise all NED positions in the private sector.
3. Require search consultants to produce balanced candidate lists.
4. Continue to make the appointments process as rigorous and objective as possible through the use of skills audits.
5. Use peer-to-peer pressure from FTSE 100 Chairmen to encourage FTSE 250 Chairmen to seek female candidates for their boards.
These are all recommendations that mirror the gender equality philosophy of the global Thomson Reuters organisation and reflects its approach to the UK corporate governance code’s principle of paying “due regard to diversity on the board, including gender’.
According to Munn, some organisations are changing. The Lloyds Banking Group, recently announced it was looking to have women in 40% of its top roles.
Mine is not a political or feminist stance. It is more a case of business common sense. Corporate UK needs to wake up to the contribution women make throughout society. It is more about diversity, equality and humanity. Attitudes to women throughout the world need to change. Capitalising upon the potential of women makes sound social, economic and business sense. It time for the discussion to evolve into action.
Charlotte Rushton is Managing Director of Asia Pacific and EMEA for the tax and accounting business of Thomson Reuters