Women on Board.

I wondered for a while about writing this particular post – mostly because I know that any post pertaining to have even the slightest whiff of equality or diversity to it (despite if it aims to support it) always runs the risk of being shot down or twisted into something it’s not.

But since I try to post first and foremost about things I feel passionately about, I could hardly ignore (nor do I want to) the topic of gender diversity and recruitment of women onto boards. 

In my professional and personal life I’ve had the pleasure of knowing, working with, being managed by and ultimately marrying some of the most incredible women you could hope to meet, so it goes without saying that I’m one of those men who are all for women ‘leaning in’ (as Sheryl Sandberg would put it).

One of the reasons I wanted to write about this particular subject is not that I believe I have anything particularly groundbreaking to add that has not already been contributed to the big debate (much of which you’ll read below), it’s rather that I’m a believer that we (the people) need to see and hear about examples of people who look and sound like us doing what we’d like to do in order to believe it’s possible. 

So, I think the more we talk about women on boards, and diversity in business as a whole can only be a good thing for inclusiveness.

In the autumn of 2010, Lord Mervyn Davies, the outgoing chair of the government’s equality taskforce began gathering evidence on the low representation of women on FTSE 100 boards. Five years after his team was set up, his target of women accounting for 25% of FTSE 100 directors by 2015 was achieved.

It was without doubt a major milestone in improving the gender balance at the top of British business, and we should certainly be celebrating what campaigning around voluntary targets can achieve. But, as highlighted in an article by Elite Business magazine, it’s also important that we understand what lies beneath these headline figures, and that is over 90% of the new female directors appointed at FTSE 100 companies over the past five years have actually been non-executives. And the FTSE 250 is lagging with only 19.6 female representation. 

As Elite Business magazine goes on to say, it’s not that non-execs are unable to make significant impact on business, but that being an NED is very different to contributing to the day-to-day direction of a company. That said, the growing influence of female NEDs is a good starting point: their impact can be exerted across Remuneration and Appointment Committees, to identify, recruit and reward the next generation of executives.

An un-named FTSE Chairman commented in a government report last year:

“I profoundly feel that companies have to be grounded in society in a way that they sometimes forget, and maybe this is part of that.

Where companies and society part company you have got a very perilous state for business, and capitalism if you like, so that maybe you’ve just got to stand up and say more diverse boards is the right thing to do, so we will just do it” (my emphasis)

There is a danger that the recruitment of female directors could be seen as a tokenistic, politically correct move designed to minimise reputational risk, perhaps outlined by the ‘right thing to do’ comment by that Chairman; rather than a proactive strategy to improve business performance.

A study by McKinsey Global Institute (which I would strongly recommend you read in full) found that $12 trillion could be added to global GDP by 2025 by advancing women’s equality. In the UK, it was found that every 10% increase in gender diversity on the senior executive team corresponds to a 3.5% increase in pre-tax profits. McKinsey rightly note that gender inequality is not only a pressing moral and social issue but also a critical economic challenge. If women—who account for half the world’s working-age population—do not achieve their full economic potential, it stands to reason that the global economy will also suffer.

In the recent Credit Suisse Research Institute Study, which analysed the performance of close to 2,400 companies with and without female board members from 2005 onwards the key finding was that, in a like-for-like comparison, companies with at least one woman on the board would have outperformed stocks with no women on the board by 26 percent over the course of the last 6 years. The report also identified numerous reasons why this was the case, amongst which were that companies with women on the board had a better mix of leadership skills, greater effort across the board, access to a wider talent pool, a better reflection on the consumer decision maker and improved corporate and social governance.

There was an interesting article in the Economist last year which some say challenges the above findings. It looks to sets out to show that women CEO’s will run companies no better than men, but I don’t believe the authors point is well made (not least because the intro line of the article reeks of ‘peeved off man’ not happy about ladies taking top jobs), but because they simply discuss whether (or not) there are differences in how men and women lead — not whether gender diversity is good for business.

I’m not saying I believe that having a female CEO will necessarily benefit the bottom line – rather I’m agreeing with a point made in a Huffington Post article that comments ‘companies with gender diversities do not do better because women CEO’s (or women at any level) lead differently or better. They do better because they have diverse perspectives – masculine and feminine strengths.

Huffington Post end on a comment which I think is fair, and relevant, and that is that ‘Solid research by highly respected organisations, disputed by some, shows a correlation between gender diversity and results.’

I for one would love board-level inclusiveness to move from being politically correct to being a fundamental competitive advantage. One thing is for certain, and that is companies need to include and recruit the best, brightest and most experienced -- and a good portion of those are women! 

What are your thoughts? Would you like to see quotas for businesses or do you think targets are a better way to approach the issue? Have you made changes to your top-level management in the name of diversity?

Perhaps we should be looking at diversity in a much broader term rather than gender? Instead simply looking at giving positions of real power to people who are not “stale, pale and male”?

Look forward to hearing from you,

Mark.