Dani Garavelli: Time to address gender imbalance

Dearth of women in higher echelons of both private and public-sector companies is a serious problem. Picture: Getty

WHEN the World Economic Forum introduced a quota system in an attempt to add a few female faces to the sea of grey suits which congregate in Davos, Switzerland, every year, many were appalled.

The new rule, introduced in 2011, required “strategic partners” – 100 leading global companies – to include at least one woman in every five delegates. But so far down the company structure would some of these elite players have had to go to find a woman, they decided to send fewer representatives instead. “They said ‘it’s not worth it, I’d have to bring my secretary along’, which is shocking,” says Charlie Woodworth, of feminist campaign group, the Fawcett Society.

The dearth of women in the higher echelons of both private and public-sector companies has been recognised as a serious problem for years. But the UK lags behind many of its European neighbours when it comes to addressing the problem. The overall proportion of women on FTSE 100 boards stands at 19 per cent, far short of the 30 per cent experts say is required for women to stop being merely representative of a particular group and start being judged on their own merit, and five – Antofagasta, Croda, Glencore Xstrata, the London Stock Exchange Group and Vedanta Resources – have no women on their boards at all. In Scotland, less than a third of those on the boards of public sector organisations are female.

Since women make up 52 per cent of the population, something is clearly awry. But tackling the imbalance is not merely a matter of equality. In the private sector, studies have shown companies with more female board members are more profitable. Analysis by McKinsey of 2,360 global companies over six years showed that, across all sectors, those companies with one or more women on their boards significantly and consistently outperformed those with no female representation. In the public sector, a lack of women at the top means the needs of female service users are less likely to be acknowledged.

While some countries have introduced mandatory quotas, the UK has so far opted for a voluntary approach. Lord Davies’ report into women on boards set a target of 25 per cent for FTSE 100 companies by 2015. It also introduced a voluntary code of conduct for executive search firms which puts an onus on them to ensure at least 30 per cent of the candidates on their long-lists are women. No 25% target was set for FTSE 250 companies on the grounds that a starting point of just 8.5 per cent made such a goal unrealistic.

There has been some progress. Last week, a report from the Cranfield School of Management found that, where a few years ago the majority of FTSE 250 companies had all-male boards, only 51 were still in that position. The percentage of women overall had risen to 15 per cent. But data compiled for the government by Professional Boards Forum BoardWatch shows that, while the proportion of non-executive directors at FTSE 100 companies has reached nearly 24 per cent – just 1 per cent shy of the target – the proportion of women holding executive positions is just 6.1 per cent, a rise of 0.6 per cent. According to the Fawcett Society, at the current rate of change it will take 70 years to achieve gender-balanced boardrooms.

With so far still to go, the clamour in some quarters for a mandatory quota system in the UK is mounting. Though the European Union stopped short of imposing it on its 27 member states earlier this year, Prime Minister David Cameron has refused to rule it out “as a last resort” and First Minister Alex Salmond has revealed he is seeking power from Westminster to introduce it for public-sector boards north of the Border. In the meantime, banks, including the Royal Bank of Scotland and Lloyds Group, have been told they will have to set their own quotas as part of a package of European Commission proposals to stop them failing.

“There’s a lack of women in positions of power across public life,” says Woodworth. “In particular spheres, it’s particularly pronounced and one of those spheres is the FTSE 250.”

We think that matters on lots of levels, not least because this is a sphere where a great deal of power and influence is held. It’s not just about it not being fair, it’s also about the views and experience of one half of society not being heard.”

Woodworth believes quotas can be a useful tool for breaking the glass ceiling. “They can help you get to a tipping point where more women are considered, where it becomes part of the narrative, where there’s an understanding that we need to have a greater depth and breadth of experience in terms of the kinds of people who make it to those positions,” she says.

In Scotland, the issue is more with the public sector. “I would say with regards to the private sector, the business benefits are clear. Companies increase their profitability, their return on investment and their return to shareholder if they have more diversity,” says Emma Ritch, executive director of equality campaign organisation Engender. “The argument for introducing quotas is even stronger in the public sector, however, because we need women on public-sector boards to ensure services meet women’s needs.”

Not everyone is convinced quotas are the way forward, though. While some believe they’re the only way to redress long-standing discrimination, others are vehemently opposed, regarding them as anti-meritocratic and patronising to women. The 30% Club, a group of chairmen and organisations committed to bringing more women onto UK boards through voluntary means, has described them as “unnecessary and potentially damaging”.

So should the UK follow Norway, Spain, Italy and France in forcing companies to increase female representation on boards in the hope it will result in a trickle-down effect? Or will mandatory quotas create a false sense of achievement?

In Norway, a 40 per cent quota was imposed on the boards of publicly-traded companies in 2003, with businesses told they would face dissolution by delisting from the Oslo Stock Exchange if they did not comply. Studies funded by the Norwegian Research Council have found the move has transformed the way boards operate. “Greater female representation seems to make meetings a little more pleasant, the preparation material is tidier and more comprehensive, and the processes more formal,” Agnes Bolsø, associate professor of sociology at the Norwegian University of Science and Technology, has said. In addition, some companies not covered by the quota law, such as the Norwegian agricultural co-operatives, have gone on to adopt it voluntarily.

“In Norway, the introduction of quotas has increased the qualification level on boards. Because the rules there were stringent, because the companies knew if they didn’t meet the 40 per cent requirement they would be shut down, they had to make an extra effort, so they looked further afield than they had before, maybe outside their local, cosy circles of the usual suspects, and found really talented, skilled women, to fill the spot,” says Ritch.

Critics argue Norway’s quota system has created an elite of women (nicknamed “golden skirts”), who hold multiple non-executive director positions, but that there has been little movement in the number of women in executive roles. They point out none of the 25 biggest companies on the Oslo bourse has a female chief executive, and only one has a woman as chief financial officer. Even among the women who have benefited from the quota system, there are differences of opinion. Mimi Berdal the most famous of the “golden skirts”, who was at one time on the board of 90 different companies, has reservations, insisting it would have been better if the transformation had evolved on a voluntary basis. But Thorhild Widvey, who served as minister of energy from 2003 to 2005, says that when she attended international gatherings back then there were no women at all.

Today, she’s a non-executive director of several companies and Statoil, ExxonMobil and ConocoPhillips all have powerful women at meetings. “A quota system is not a magic bullet that solves all problems,” says Ritch, “but research carried out by Catalyst [a US organisation aimed at expanding opportunities for women] suggests that where private-sector organisations have achieved gender balance what you tend to see in the long-run is more women at all levels. Women see clearly there are role models and have a sense their ambitions will be respected within the context of the company. Of course, what is cause and what is effect is hard to unpack; it could be those organisations which are more equality-minded are likely to see shifts at all levels, but there does seem to be a trickle-down effect.”

Engender supports mandatory quotas on a temporary basis on the grounds other measures aren’t producing the hoped-for dramatic shift. The organisation believes if companies are forced to put more women on their boards the culture will change to such a degree that quotas cease to be necessary. But to Helena Morrissey, the mother of nine who is chief executive of Newton Investment Management and the driving force behind the 30% Club, the whole idea of quotas is faintly insulting. “I’m against a quota because a company has to believe in change and live the change, it cannot be imposed upon them,” she has said. “Quotas actually undermine the principle of equality and are patronising to women.”

The implication is any woman brought on board under a quota system will be assumed to be there simply to make up numbers, that their real qualifications and talents will be undermined. Others believe the system operates as an old boys’ network and that quotas merely correct existing discrimination.

“To be in a place where the vast majority of people holding the reins of power at the top tier of private business are men shows that, as it stands, it isn’t meritocratic,” says Woodworth. “We still have a situation where people tend to recruit in their own image, we still have a situation where it’s very much taps on the shoulder and we definitely have a cultural issue in terms of women reaching a certain point within their careers and then beginning to trail off.

“Some of that will be down to the environment they are working in and some of it to the failure of leaders to reach out and foster people coming through.” There is also, in some quarters, a sense that if boards are genuinely to become more representative they should address issues other than gender. Is replacing a proportion of privileged white men with privileged white women really so revolutionary?

Even among the most passionate advocates of a quota system there is a recognition they are not on their own sufficient to transform traditional power structures. Unless women are being trained, nurtured and encouraged to stay within the company at a time in their lives when having children might otherwise see a drop-off in their career, the improvements will only ever be superficial.

As well as setting targets, Lord Davies emphasised the importance of improving the “talent pipeline”, planning for succession and introducing effective mentoring so companies have an ample supply of women ready to take on senior executive roles. The 30% Club has two pipeline groups and works with the Professional Boards Forum, the Women’s Business Council and the Mentoring Foundation to raise awareness and promote change. Martin Gilbert, the CEO of FTSE 100 company Aberdeen Asset Management, has also campaigned with the 30% Club to encourage shareholders and fund managers to put pressure on boards by voting against the re-election of directors who will not change their approach.

“Quotas are one part of a broader package of positive measures we would like to see taken,” says Woodworth. “We need to ensure that throughout companies, from top to bottom, there’s more awareness of the need to get to a place where it’s not just white, middle-aged men running the show.”

Twitter: @DaniGaravelli1