Gender diversity: turning up the heat
Senior-level gender diversity in the world’s largest economies is stagnating, recent studies and reviews have found. Yet there are opportunities for progress if lessons are shared across borders, writes Ruth Holmes for an article first published in the autumn 2016 issue of Re:locate magazine
Last October’s closing report of the Davies Review celebrated female representation on the boards of the UK’s largest companies reaching, and slightly exceeding, its 25 per cent target.
Highlighting the fragility of this success, and perhaps how little has changed, new research from a cross-university team, which was launched alongside the UK government’s latest review, shows that, for the first six months of this year, just 24.7 per cent of new FTSE 100 board appointments were filled by women. In October, the figure was 26.1 per cent.
“The focus on boards must be preserved, as the pace of change has not kept up after the Davies closing report,” said Susan Vinnicombe CBE, professor at Cranfield University and co-author of the Female FTSE Board Report 2016, commenting on the finding.
A new review
Launched in July, the UK government’s new independent panel supporting women in senior leadership roles is therefore timely. The Hampton-Alexander review, led by Sir Philip Hampton, chair of global pharmaceutical firm GSK, with Dame Helen Alexander, chair of global events company UBM, as deputy chair, is tasked with ensuring 33 per cent female representation on FTSE 350 company boards by 2020.
Its aim is to widen the focus of improving female representation in senior roles to FTSE 350 companies – both FTSE 100 and FTSE 250-listed ones.
The gap widens
According to the latest available data from BoardWatch, which tracks the appointment of women directors to FTSE 100 and FTSE 250 companies, women occupy 22.2 per cent of directorships across the FTSE 350.
That statistic looks promising. However, the Female FTSE Board Report 2016, published by Cranfield, City and Queen Mary London universities to coincide with the new review’s launch, highlighted the stark fact that, for UK businesses to achieve the 33 per cent goal, companies needed both a constant turnover of board directors and a one-in-three appointment rate for women.
Moreover, turnover rates have actually fallen in recent months. With the appointment rate for new female FTSE 100 appointments also dropping and the appointment rate for women falling below the one in three required, again the gap is widening.
Not just US
The UK is not alone in facing severe gender gaps that are in danger of worsening. Figures for 2015 collected by US campaigning organisation Catalyst show that progress has stalled in US boardrooms, too.
Catalyst’s annual survey of S&P 500 companies found the number of women holding board positions unchanged in 2015 from its 2014 level. Women held 19.9 per cent of board roles in 2015, and were appointed into 26.9 per cent of new directorships.
“Our new 2015 Catalyst Census: Women and Men Board Directors shows little progress has been made at the board level, and even less progress has been made in the pipeline for women officers and directors,” said Deborah Gillis, president and CEO of Catalyst, when the latest research was unveiled in June.
“Men continue to be overrepresented, holding more than their fair share of board seats and, in some cases, all the board seats.”
EU too
Further building the evidence base around progress and challenges at country level, the European Women on Boards (EWoB) network released the findings of its five-year study in April.
Realizing Europe’s Potential: Progress and Challenges revealed that, while female directorships in the EU’s 600 largest firms had increased from 13.9 per cent to 25 per cent over this period, the trends driving growth were not delivering sustainable change.
Among the STOXX 600 enterprises it surveyed, the report found that the trend towards greater gender diversity on boards had been driven “in particular” by women “materially increasing their presence as independent non-executive directors”, said Marie- Ange Andrieux, co-chair of the EWoB and co-leader of the study.
Rachel Davis, deputy CEO of Armstrong Craven, a global talent consultancy, reflected this observation in relation to the UK’s latest female senior representation data in August. “The figures did not paint a true picture, as the vast majority of the female roles were non-executive and often the same group of successful women were holding positions on a number of different boards.
“It is also the case that a large proportion of the female executive board roles are either HR director or company secretary, rather than the full breadth of executive positions.”
Dr Ruth Sealy, senior lecturer at City University and Female FTSE Board Report 2016 co-author, said, “For change to be sustainable, we must focus on the pipeline and ensure progress through senior management ranks. Only 19.4 per cent of FTSE 100 executive committee members are women, and women hold only 10 per cent of the most import senior executive and operational roles on these committees.”
Going beyond the quick win
The findings suggest that, while the quota or informal target approach has paid dividends in some respects, it has failed to increase the talent pipeline consistently. These factors also explain the persistent gender pay gap, particularly for women educated to higher levels.
Commenting on why the gender pay gap is still an issue, Chris Rowley, professor of human resource management at Cass Business School, said,
“The Equal Pay Act has been in effect for over four years, and successive governments’ initiatives have tried to deal with the underlying issues of unequal pay – initiatives such as flexible working, improving part-time worker rights, more-affordable childcare, and shared parental leave – in response to concerns childcare responsibilities impact on female careers.
“These actions will be joined by upcoming rules forcing larger employers to analyse and publish pay gaps, as transparency is a great driver of equality.”
Professor Rowley also highlighted continuing gender imbalance in senior posts and promotions, which, he said, was due to poor ‘signalling’ of success for female directors and structural issues.
“This signalling,” he explained, “comes in the form of networks and nomination-process bias, role-model and mentor shortages, work-family balance, legal ambiguity and policies, and cognitive behaviour.”
Concluded Professor Rowley, “Research shows gender diversity actually delivers better financial results, organisational cultures and decision-making. The benefits of part-time working should be recognised, measured and rewarded better by management, in terms of pay and supporting career paths and patterns that are not the typical 'linear' ones.”
The European Women on Boards study echoes findings from global human resources consulting company Mercer’s latest analysis of gender diversity at senior roles across 42 countries. Published in February after its launch at the Davos World Economic Forum, the research, based on 600 companies, pointed to weak female talent pipelines as a key factor in delivering on targets rather than making sustainable change.
Alongside female representation at middle management levels, it found that culture and female presence in senior commercial profit-and-loss roles were key indicators of better long-term gender-parity performance.
Mercer’s study also found that, globally, women were one-and-a-half times more likely than men to be hired at executive level. However, they were leaving organisations from the highest rank at 1.3 times the rate of men. This not only undermines gains at the top, but also suggests that organisational cultures need to change and adapt.
Closing the gaps for good
Latin America topped Mercer’s global ranking for engagement of middle managers on diversity and inclusion, as well as women occupying above-global-average levels of profit-and-loss roles (47 per cent, compared with 28 per cent globally).
It is also the region that is going to come close, all things being equal, to gender parity by 2025, according to Mercer’s analysis.
Taken together, the increasing weight of evidence available globally suggests that the pressure on the glass ceiling is mounting. Cracks are beginning to appear, but it has yet to shatter completely.
The data also suggests that, if employers and leaders truly get behind the issue, turn up the heat, and make fundamental changes across workplace culture, mindsets, data capture and talent development, as well as learning lessons from across national borders, real change will come.