Will the CBI’s ‘comply or explain’ approach bring more women into the boardroom?

15 Dec

I tend to feel nervous when noises are made about introducing quotas to ensure gender diversity at board level. If companies were forced to set and reach targets for a certain number of female directors, this question would nag at me: if a woman is appointed to an executive board director role, is it because she is absolutely the right person for the job – or because she’s there to make up the numbers?

Yet the CBI has been more sophisticated than simply suggesting strict quotas in its submission to the Davies Review, which has been tasked by the Coalition Government to investigate why there is a lack of women on boards, and to devise a strategy and action plan to increase their numbers.

The CBI recommends that listed companies should set internal targets for boosting the number of women in their boardrooms – and those targets can have sector and cultural variances, depending on the number of females employees a company has. However, instead of imposing a penalty for not achieving those targets, the CBI recommends a ‘comply or explain’ approach – meaning that companies would have to report on their diversity levels, explain if they fail to deliver, and set out the action they will take to address the shortfall.

To show they mean business, members of the CBI task and finish group have pledged to address and improve female representation on their own boards. They hope that, in leading by example and introducing more transparent board-level appointment processes, and by improving their talent management systems, they will encourage other FTSE firms, as well as small listed companies, to take steps to achieve gender diversity.

It is ludicrous that women are so poorly represented at senior level, and their numbers do not match the proportion of women in the workforce as a whole. A female director is still regarded as a novelty in some sectors – and many Boards do not have any women at the top, as the Female FTSE 2010 report from Cranfield University revealed. Female representation at the top levels of British industry have not changed in the past three years – in spite of the strong arguments for having a diverse Board. The CBI is making a robust case for gender diversity in its submission: the benefits include having a range of views that helps ensure good corporate governance, as a spur for innovation and creativity, and to help attract more women to work for the company.

CBI president Helen Alexander said: “What is needed is cultural change, not quotas, ratios or tokenism. Schemes such as flexible working, mentoring and networking have helped, but making progress at the very top levels of business will require more sophisticated talent management. We need to see more women progressing through the ranks and do more to keep them moving along the career pipeline into the top jobs.”

Responding to the CBI’s submission, Lord Davies of Abersoch said: “I am pleased to see that this issue has got a strong push behind it from business, but as the recently published Cranfield report highlighted, there has been too little movement on diversity in the boardroom for too long. To see a step change on this we need to everyone to pull together: British businesses and their shareholders, the Government and the headhunting profession, to deliver the changes that will help women to achieve these roles.”

It will be interesting to how big a part the CBI proposals will play when he presents his findings and his strategy in February 2011. One commentator – David Prosser in The Independent – even suggests that tough quotas are the only way to smash the glass ceiling.

Left to their own devices, companies haven’t made enough progress, and there hasn’t been that ‘cultural change’ in the top ranks of UK business. Perhaps having to explain why their diversity levels haven’t improved may force companies to start putting into action what up to now may have just been discussions on well-meaning diversity committees.

This could well be a case of what gets measured gets done.

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3 Responses to “Will the CBI’s ‘comply or explain’ approach bring more women into the boardroom?”

  1. Karen Ramirez 15/12/2010 at 9:57 pm #

    Hmm – this is a tough one! Whilst as a woman everything inside me screams “I only want it on merit”, not much has changed despite all the reports, media focus and sessions showing the commercial benefits to companies of embracing board diversity. It will be interesting to see whether having to explain failure to increase diversity makes a difference or whether we finally have to swallow our pride and follow the Norwegian example to really see changes made.

    • womaneer 15/12/2010 at 10:16 pm #

      The CBI quotes figures from the Australian Securities Council saying that a similar scheme to this ‘comply and explain’ one has helped boost the number of women on the board: 27% of new appointments in 2010 have been female, compared with 5% in 2009.
      I also wonder whether this is one last chance for companies to get their boards in order before legislation (as in Norway) is imposed on them.

Trackbacks/Pingbacks

  1. Is it time to call a halt to equal opportunities policies in the workplace? « womaneer - 04/01/2011

    […] off women who are trying to ‘have it all’. It certainly puts a new perspective on the call for quotas to achieve boardroom equality. Ultimately, it suggests that equality legislation may have achieved […]

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