VOLUNTARY approach is not enough if Nicola Sturgeon’s ambition of boardroom 50:50 by 2020 is to be realised, says Dr Matthew Dutton.
There is a change taking place in the boardroom. Women are breaking through to occupy seats once held by men. But change has been slow. Is it time to consider quotas as a way of delivering equality?
Holyrood may be looking increasingly to Europe not London for guidance
The UK government has resisted the use of legislation to enforce gender equality in the boardroom. Instead it has backed voluntary measures proposed by Lord Mervyn Davies, the former Labour trade minister, to set a target for FTSE 100 companies to have women in 25 per cent of board roles. It seems likely that the target will be met this year. Women now hold 23.5 per cent of FTSE 100 directorships. This is up from 12 per cent when Lord Davies published his first report in 2011.
Many will see this as a vindication of the voluntary approach under which Lord Davies produced annual reports of progress towards the 25 per cent target. Companies deemed to be falling short of this target were named and shamed.
But look at the bigger picture. Female rates of participation in the labour market have increased to an all-time high. Across the UK, 66 per cent of working age women are in employment. In Scotland, the figure is marginally higher. And yet high participation rates are not feeding through to the most senior levels. Only 8 per cent of chairs and executive directors on FTSE 100 boards are female.
Many European countries have tired of the slow pace of change and have introduced laws that require companies to enforce a minimum quota for the number of women on boards. In May, Germany passed laws that will require the largest companies to reserve 30 per cent of boardroom seats for women. The move by Germany to introduce quotas comes after Norway, Spain, France, Italy and Belgium had already done so. On the European continent, legislation has been embraced as an effective way to bring about change that social and voluntary pressure had failed to deliver.
In November 2014 Nicola Sturgeon, the SNP First Minister, announced a cabinet with a 50/50 gender balance. The First Minster stated that the creation of a gender balanced Cabinet was “a clear demonstration that this government will work hard in all areas to promote women, to create gender equality and it sends out a strong message that the business of redressing the gender balance in public life starts right here in government”.
The Scottish Government has set a target of achieving 50 per cent gender equality in the boardroom by 2020 (50:50 by 2020). However, of the 23 FTSE 350 companies based in Scotland, the percentage of women on boards is 16.9 per cent. If the 50 per cent target is to be met, the rate at which women are entering the boards of Scottish companies needs to accelerate rapidly.
Whilst the government has introduced voluntary measures such as the Scottish Business Pledge that includes a commitment to make progress on gender diversity and gender balance, there is a growing sense that if the government is to achieve its targets it will have to look to the European legislative model to bring about change in the boardroom.
This move would set the Scottish Government on a different course from the UK Government that has backed a voluntary approach. However the Equality and Human Rights Commission has questioned the legality of quotas and laws to enforce boardroom equality would require powers to be transferred from Westminster.
Research by the Employment Research Institute at Edinburgh Napier University published by the Scottish Government outlined the rationale for greater gender diversity in the boardroom. There is evidence that gender balanced boards are better able to understand the needs of clients and are more open to a wider pool of talent. Predominantly male boards are, after all, selecting members from only half the talent pool and enforcing a view among senior female colleagues that they are unlikely to be considered for board roles.
The Scottish Government’s rationale for gender equality in the boardroom goes deeper than commercial motives. Equality is embedded in the government’s economic strategy: “reducing inequality is not only important in itself, but is vital to creating the conditions to deliver sustainable economic growth over the long term”. Inequality, of which low levels of female representation on boards is one indicator, is viewed as a constraint on economic growth.
The government will need to find a way of increasing the number of women in the boardroom to show it is making progress on tackling inequality and promoting economic growth. Given that voluntary approaches to improving gender diversity in the boardroom have failed to achieve anywhere near the targets set out under the 50:50 by 2020 target, Holyrood may be looking increasingly to Europe and not London for guidance on what works to increase gender diversity in the boardroom.
If the First Minister is to realise her hope of creating a Scotland in which “no young girl should grow up in 2015 with the prospect of facing a glass ceiling that limits their ambitions”, she should not rely on the glacial pace of social change and voluntary measures.
• Dr Matthew Dutton is a Senior Research Fellow at the Employment Research Institute at Edinburgh Napier University