Diversity is a thorny issue
This week a review on gender equality in Britain's boardrooms is due to be published by Lord Davies of Abersoch. The former trade minister is expected to recommend that a fifth of directors in FTSE 350 companies should be women by 2012, rising to a quarter shortly afterwards. It is understood that the imposition of statutory quotas has been rejected but could return to the agenda if companies do not achieve sufficient progress.
According to Cranfield University School of Management, the proportion of women on FTSE 100 boards has stuck at 12.5 per cent over the last three years. Lord Davies is expected to encourage companies to publish their own targets, and comply with them, or explain to shareholders why they have not done so.
The report is due to be launched by David Cameron in Downing Street on Thursday and will ask headhunters and shareholders to sign up to a code of conduct to lift the number of female candidates. Lord Davies explained : 'If we are going to get success we can't do it without a partnership between the various stakeholders. Based on the current trend, it would take 70 years for women to hold half the FTSE 100 directorships'.
Lord Davies will also urge companies to promote more women to executive committees to create a larger pool capable of taking up non-executive posts. Last year only 18 out of 135 new appointments to FTSE 100 directorships went to women.
The issue is a complex one. A survey of almost 3,000 managers carried out by the Institute of Leadership and Management found that three quarters of women said the 'glass ceiling' still exists in business and prevents them from being promoted to senior management or board level.
However, the same study found that just 38 per cent of men believe there is a glass ceiling. The study would appear to suggest that lower confidence and career ambtions among women are partly to blame for the lack of female representation at board level.
Only half of women managers described themselves as having 'high' or 'quite high' levels of confidence, compared to 70 per cent of men. Again, only half of the women surveyed had expected to become managers when they started their career, compared to almost two-thirds of men.
Miss De Valk, Chief Executive of the Institute of Leadership and Management, said: 'our research reveals that women managers tend to lack self-belief and confidence compared with male counterparts. Women feel a greater sense of risk around promotion, which leads to a more cautious approach to career opportunities'.
The study did not attempt to explain why femal confidence and career aspirations lagged so far behind those of their male counterparts - it may well be that when changes proposed by Lord Davies bring sufficient transformation to corporate culture and women no longer feel as though they are operating as a minority in a male dominated world, their confidence and aspriations will increase accordingly. Perhaps the changes proposed will create a virtuous circle that will naturally increase the speed of change - only time will tell.
Britain is not alone in facing the challenge of equality in the boardroom. Regulators accross Europe are reportedly starting to lose patience on the issue of female representation.
Regular readers of this blog will recall that Josef Ackermann, Deutsche Bank chief executive, said earlier this month that women would make Deutsche's management board 'more colourful and more beautiful' and thereby added fuel to the debate about quotas and the lack of women representation on supervisory and executive boards in Europe.
In several countries, and indeed at European Union level, the introduction of a compulsory quota has become a hot topic. Many managers, and a lot of female executives, are against such quotas but advocates point to separate studies conducted by McKinsey and the UN that demonstrate that companies with the most women on the board are doing better than their rivals in profitability and/or share price growth. They also point at both Norway and France where quotas for non-executive directors are in place.
Vivane Reding, European Commissioner, is persuaded that gender balance is a question for society. She has a meeting with the heads of 15 large companies on March 1 and wants them to present concrete suggestions on how to foster gender diversity in Europe. Ms. Reding has threatened to impose quotas on the biggest 500 listed groups in Europe if they do not move faster on diversity. She points out that fewer than 3 per cent of their supervisory boards are female.
In Norway, a law forced listed companies to have women make up 40 per cent of their boards from the begininng of 2008. Following initial scepticism that there would be enough competent women to fill the suprvisory boards, many investors and executives today regard it as a success. The law laid bare the previously unused potential of female managers and spurred the emergence of 'golden skirts' - women who work full-time as non-executive directors.
In January, France became the lastest country to set a quota for women on boards of large listed companies - at least 40 per cent of their boardroom seats must be reserved for women by 2017.
While quotas may yet be introduced into other countries, many are looking, like the UK, at voluntary targets which would give companies greater flexibility and which would be welcomed by investors and at least some managers. Just the threat of quotas seems to be sufficient to give the issue a significant push without the need to actually impose them.
Meanwhile, whatever is announced on Thursday, the Association of British Insurers announced yesterday that it would be tracking company efforts to recruit women onto their boards. The powerful shareholder group will use its 'traffic light' report system to alert investors to the perfomance of companies' efforts on diversity. Companies will be encouraged to publish their own targets and comply with them or else they will be held accountable by their shareholders.
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