Womaneer Hot Topic: Gender Quotas in the Boardroom

3 Mar

It will take 70 years to achieve gender-balanced boardrooms in the UK, at the current rate of progress. That’s why Lord Davies of Abersoch was commissioned by the government to investigate the reasons why more women aren’t making it to board level. There have been discussions for years whether to implement quotas such as those in Norway, where public companies must have 40% of women on their board of directors. Here’s a round-up of reaction to Lord Davies’ conclusions:

Are quotas the best way to achieve gender balance in the boardroom?

Lord Davies’ report rejects quotas for the time being, and recommends instead that:

  • FTSE 100 listed companies should aim for 25% female board representation by 2015
  • Companies should set targets for 2013 and 2015.
  • Chairmen should announce their goals in the next six months, and chief executives should review in 2013 and 2015.
  • Companies should disclose the number of women on their boards, and work to drive up the number of women at the top.
  • Companies should advertise non-executive directorships to encourage diversity of applications.
  • Headhunters should draw up a voluntary code of practice for appointments to FTSE 350 companies.
  • Companies have to report annually on boardroom diversity.

In short, companies need a radical change in their mindset, and they will need to comply or explain.

Lord Davies said: “This is not about aiming for a specific figure and is not just about promoting equal opportunities but it is about improving business performance. There is growing evidence to show that diverse boards are better boards, delivering financial out-performance and stock market growth.”

The business case for a gender-balanced board

It’s not just about equal rights for women. Having a gender-diverse senior team can help improve commercial performance.

  • Evidence suggests that companies with a higher proportion of women in senior management teams helps improve stock-market performance, according to McKinsey’s Women Matter report.
  • A Catalyst report on Corporate Performance and Women’s Representations on Boards concludes that having more women on the board can help companies outperform competitors with a 42% higher return on sales.
  • And a survey by the Government’s Equalities Office found that 80% of people believe a balanced senior management team would be better at understanding the company’s customers, and 59% believe that an all-male team would make poorer decisions.

In spite of this evidence, the percentage of women on FTSE 100 words remains at 12.5%, according to the Cranfield School of Management Female FTSE report 2010.

How business reacted

  • Business Secretary Vince Cable welcomed the report, saying it was “clear that a business-led approach is the best way to increase the number of women on company boards”.
  • The CBI says companies should set their own internal targets, based on the characteristics of their business, rather than be work to a Government-enforced target, believing that quotas wouldn’t bring about the necessary cultural change.
  • Chartered Management Institute chief executive Ruth Spellman saysthe growth in the number of women in the workplace is “far closer to a snail-paced evolution as the figures for women in the boardroom lag far behind. Reasons may include the power of the old boy’s network or a lack of self-confidence. If action is not taken, equality will continue to be an issue stifling British business at the very time it needs the diversity to grow.
  • PricewaterhouseCoopers (PwC) has pledged to boost the number of women it promotes to senior posts by introducing a ‘comply or explain’ approach. PwC leaders will be asked to consider women in their promotion rounds, or asked to explain what the block to progress is, so it can be addressed. However, it has promised to look at the underlying blockers rather than achieve a target at all costs. It says the blockers are that women haven’t been asked; haven’t said they want to progress; or don’t have confidence in their abilities.”
  • Nicola Horlick, fund manager and City ‘superwoman’, says: “Generally, I do not favour positive discrimination. However, our public companies show no desire to be more inclusive of women and so I see no choice other than to push them in that direction. I am not a feminist and, as I say, I believe in meritocracy, but sometimes you have to create rules initially in order to give certain sections of society a chance.”
  • The Equality and Human Rights Commission agrees that companies need to make their own progress, but speed it up and demonstrate the progress they’re making on diversity issues – rather than having quotas imposed upon them.
  • However, The Fawcett Society, which campaigns for equality between men and women,says the report is a “missed opportunity”, and says quotas are the only “sure-fire way” to ensure more women reach the boardroom, and leaving businesses to tackle the problem voluntarily isn’t working., and the glass ceiling is still “stubbornly intact”. Acting chief executive Anna Bird said: “Government should set a deadline by which they will force boards to take action. Wishful thinking and encouraging words are not going to bring about the step change we urgently need.”

What the commentators say

While businesses may be breathing a sigh of relief at not having quotas forced on them, for now, many commentators – male and female – have come out in favour of quotas, saying they’re the only realistic and practical way of redressing the gender imbalance in the boardroom.

  • The Board Talk blog says Lord Davies is “both clever and an optimist” for fuelling change in the boardroom via “transparency and pressure” – but thinks the onus now is on headhunters to draw up their own code of conduct, and on plcs to “create an ethos that attracts, retains and promotes talented women”.
  • Damian Reece in The Telegraph says the “real disgrace” is that shareholders haven’t forced companies to do anything about boardroom diversity before. He argues that companies have to get women ready for boards, “A bigger cadre of women executives will come about only once employers structure meaningful career paths around the more complex life choices that women face.”
  • Sasha Galbraith in Forbeswoman doubts the voluntary target proposal will work – but applauds the ‘comply or explain’ move to compel companies to declare their goals and timeline for getting women into senior roles – or explain why not.
  • Maria Reinertsen in The Guardian says quotas would force companies to look around for talent. “Mandatory quotas are bureaucratic, they hurt both the pride of women and the freedom of business. But if you genuinely want more women in the boards, it’s probably the only way to achieve it.”
  • And Barbara Ellen in The Observer questions why women fear tokenism – even after generations of sexism – as a way to bring about “long overdue changes to unjust male-centric working practices”. She adds: “Everyone is better off with more women fairly placed at the top and yet still there’s this fretting over a gender-based fast track, she adds, suggesting that women should jump at the opportunity rather than waiting another 70 years for boardroom parity.”

2 Responses to “Womaneer Hot Topic: Gender Quotas in the Boardroom”

Trackbacks/Pingbacks

  1. Businesswoman says appointments should be based on merit, not gender « womaneer - 05/03/2011

    [...] Mar With many senior business figures and thought leaders supporting Lord Davies’ recommendations to boost the number of women in the boardroom, it’s perhaps no surprise that female business [...]

  2. Headhunters fear Lord Davies’ proposals will lead to positive discrimination « womaneer - 18/03/2011

    [...] and skills and experience should win out every time – in a survey carried out in response to Lord Davies’ proposals to increase the number of women on the [...]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 377 other followers

%d bloggers like this: