Following his visit to the Northern Future Summit (8th– 9th February 2012), UK Prime Minister David Cameron announced that he is considering bringing in quotas for the number of women appointed to corporate boards. It seems to me a universally acknowledged truth that those against quotas are usually the ones least likely to be benefit from them. In the case of combating gender apartheid in the corporate arena (C-Suite), a lot of women executives, surprisingly, are also against quotas. So it is worth considering why this might be and then doing it anyway. Quite apart from governance issues; allowing a meritocracy to exist, management of corporate risk factors, supporting business with less “red tape” …blah, blah, blah…the one fact that gets forgotten in the quotas debate is that it is morally the RIGHT thing to do. Allowing a known inequality to persist when you could do something about it shows a lack of leadership in dealing with discrimination.
‘Gender apartheid’, ‘inequality’ and ‘discrimination’ might be strong words to use to describe a scenario that not everyone will aspire to, but, research from the Equality & Human Rights Commission (EHRC) shows that at current rates “it will take another 70 years to achieve an equal number of women directors in the FTSE 100” (‘Sex & Power’ Report 2011). In simple terms that means a baby girl born in the UK today is unlikely to become a Chair of a FTSE company in her working lifetime in spite of having the best education, skills, knowledge and network!
The voluntary target of 25% female board members in FTSE 100 by 2015 advocated by the Lord Davies review falls far short of the ideal 50% and looks like a target that will not be achieved anyway given that the figure is currently 14.9%. FTSE 250 (currently at 9.2%) and FTSE 350 figures for gender parity are even lower at present. The Davies review has helped highlight some of the worrisome issues: the “pipeline” problem (not enough qualified, skilled women apparently); executive recruiters signing up to a code of conduct and raising the issue with boards; governance issues faced by “inexperienced” (women) executives etc. What it has also shown is the amount of time companies will waste in “defending the indefensible” rather than proactively building their own pipeline, fast-tracking potential candidates and generally behaving as if they know “how to right this historic wrong”.
Mark Littlewood, Director General at the Institute of Economic Affairs, said: “proposals to force companies to increase the number of women on boards are extremely ill-advised. Imposing a mandatory quota would be yet another irritant to UK firms. Burdensome overregulation of this kind is not a driver of economic growth. In a free market, people progress because of their skills and qualifications, not because of their race or gender. Forcing more women into boardrooms will not boost productivity, it is a distraction from the actual question of how to get the economy to grow.” (11th February 2012) However, many would dispute that we operate wholly in a “free market” when it comes to regulation in the form of taxation, health and safety legislation, levies on imports, subsidies for certain sectors, quality assurance requirements, public sector procurement and other state control mechanisms on business. Indeed, “burdensome regulation” would not be required if industry was managing to achieve a healthy gender balance by itself. The reality however is very different.
For decades women have shown themselves to be capable for working just as hard as men; putting in the hours, of making sacrifices like foregoing having children, of behaving as expected, of doing their duty, of helping others and putting the needs of shareholders, customers and suppliers ahead of their own needs. So why should a hidden barrier prevent them from attaining a seat on the board? The US-based think tank Center for Work Life Policy (CWLP) research shows that women executives who find a “sponsor” (a mentor) are more likely to attain a boardroom place. So why not make it part of a board member’s job description that they have to mentor a young, female middle management executive? Thankfully, many companies already do. And women are watching. Many will research companies and organisations that are “female friendly” in the hope that this will give then a boost up the career ladder.
India Gary-Martin, Managing Director Technology and Operations at JP Morgan and President of City Women’s Network recently tweeted “Quotas are a mechanism just like the old boys’ network – it’s not the quotas that would keep a talented woman on a board – just a mechanism for them to get there. Women would still need to be judged upon their skills, talents and qualifications. Who cares how you get there as long as you are capable of doing the job.” Detractors of quotas claim that forcing companies to recruit women will lead to the appointment of “trophy directors” (presumably without the necessary skills) but Ms Gary-Martin goes on to cite her own example “Quotas are the only reason women and ethnic minorities are more prevalent in business in the US. I’m the product of quotas and so what?” Norway, where a 40% quota was enforced in 2003, has not seen a collapse in its economic infrastructure. Indeed many of the recently collapsed companies like Enron and Lehman brothers had heavily male-only boards. Lehman Brothers’ collapse even led Harriet Harman MP to claim that had there been more women on boards of many of banks, the banking crisis may have been averted.
Prior to enforcing a quota, Norway’s corporate boards only had only 6% women. Ansgar Gabrielsen, the Norwegian minister for Trade and industry, who forced through the quota said in an interview to The Times newspaper (19th January 2012) “I noticed that there was an economical value in having diversity because mixed boardrooms created more business. I also saw that, unless you force it by law, companies will not voluntarily increase the number of women on their boards”. And therein lies the truth. Although all the ‘voluntary’ initiatives advocated by the Davies Review will, in time, have effect – on their own, they are not enough. To achieve a sustained and credible shift we need something more than piecemeal projects and calls for a “gentleman’s agreement” on a cultural change in the boardroom – we need quotas, now!
It is depressing that Prime Minister David Cameron sought to link the Women on Boards issue with that of the entrepreneurship. “If women’s entrepreneurship reached the same level as the US, there would be an extra 600,000 extra women-owned businesses, contributing an extra £42 billion to the economy,” he said on 9th February 2012. In many ways, the two are issues are wholly disparate. Encouraging more women to set up in business would help improve economic growth, but is unlikely to change the status quo in corporate boardrooms. Many FTSE companies are loathe to even appoint outside the normal recruitment remit: women working in public sector organisations of the same size, for example, or even from third sector bodies like charities and NGOs. Entrepreneurial women are probably least favoured in the pecking order for appointment to corporate boards!
There is a vast body of research ‘for’ and ‘against’ quotas. In 2007, management consultants McKinsey & Company found that firms with three or more women in senior management roles in large corporations tended to score more highly on nine key measures for corporate success, including leadership, motivation, innovation and accountability. This research added to the growing arsenal of evidence on the value of boardroom diversity has led Viviane Reding, European Justice Minister, to launch an EU-wide consultation on increasing women’s participation at senior levels in companies. She said at the launch of the consultation, “Personally, I am not a great fan of quotas. However, I like the results they bring”!
The arguments for and against are summarized below:
The Arguments ‘For’ Quotas for Women Board Members
– Quotas are morally the RIGHT thing to do to end discrimination
– Quotas work
– Women board members bring a diverse point of view
– The dynamics of a board will change (given the “ivory towerism” of recent years this may not be a bad thing)
– Women board members often attract other women (expand the pipeline)
– A balanced, diverse board is likely to require more engagement from individual board members, this may lead to slower (but also lower risk) decision making
– Boards may become more transparent and open as a result
The Arguments ‘Against’ Quotas for Women Board Members
– Quotas are deeming to women, most of whom want to get to the C-Suite on merit
– Quotas will encourage tokenistic appointments (trophy directors) i.e. recruitment by non-meritorious methods to fill artificially set targets
– Norway has had a quota for 40% of corporate executives to be women and this has made no difference to their board effectiveness.
– Quotas may lead to younger and less experiences boards leading to detrimental performance and lowering of the share price.
– Quotas have no impact on the gender parity at management level in companies.
References:
C4 Fact Check: is sexism bad for the economy?
McKinsey & Co: ‘Women Matter: Gender Diversity, a corporate performance driver’
University of Michigan report by AmyDittmar & Kenneth Aherne ‘TheChanging of Boards’
Norman BroadbentBoard Index says Lord Davies targets will miss deadline
Commission weighs options to break the ‛glass ceiling’ forwomen boards
Women on Boards – 6 month Monitoring Report, October 2011(Cranfield University)