Women in Boardrooms: Supply not Quotas.
Last year, Lord Davies of Abersoch decreed that businesses should have 25% of the seats around the country’s boardrooms occupied by women, and set a target of 2015 for the top 250 businesses in the UK to get there. A year on, how is positive discrimination going?
Well, the FTSE-100 now has 16.7% female board members up from 12% a year ago, and the number of all-male boards has dropped to just 8. Well done Blue-Chips. The FTSE-250 has faired slightly worse, and the overall top 250 businesses have stayed roughly static at 10-12%.
Good work then, well done Lord Davies…. Except that growth was all last year. In 2012 the total number of female C-Level appointments in the FTSE-100 was….? Zero. And only 5% of the 87 FTSE-100 appointments in the last 2 years have been female (Source: BoardWatch). Even worse, the FTSE-250 hasn’t put a woman on a board for over 12 months (and has lost some, poached by the FTSE-100 and large private businesses).
The UK is not alone. EU Justice Minister, Viviane Reding, set similar targets for Europe’s larger businesses last year; Targets that again have been missed (attaining just 13.7% female representation on boards). So dismayed is Ms Reding that she is formally proposing that the European Commission is to set quotas – 40% females on boards by 2015, initially NEDs but with the plan to encompass all. Stick, not carrot. Fortunately, the UK government has stood firm in its objection to quotas.
So what’s the problem?
Simple. Supply. At the current time there are simply not enough well qualified women to go around to fill 25% of boardroom seats of the top 250 businesses in the UK. Many female commentators, the amazing business-woman, UK Digital Champion, co-founder of LastMinute.com and Non-Exec at M&S, Martha Lane Fox being one, will vehemently disagree, but having been immersed in executive recruitment for 18 years, once you get to FTSE-350 (or comparable privately-owned size) over 90% of genuinely suitable contenders are male. That’s just the way it is.
[At this point, I must highlight that well over the magic, arbitrary decreed 25% of my own executive placements in the past 5 years have been female].
There is no doubt that businesses with females on the board have typically fared better than those without (a Credit Suisse survey stated that large-cap stock performed 26% better on average when females had seat(s) at the board table). These same female-leader-influenced businesses also rank better in employee surveys/”Best places to work” rankings/etc. (although as any scientist will remind us, the fact that two events repeatedly occur at the same time does not mean that one event causes the other.) But regardless, there is no specific reason to shun female board representation.
There is no significant discrimination from businesses in my experience either. I have only come across one business in over five years that has specifically shown a preference for a male, and that was due to the requirement to interact with (and travel to visit) a predominantly middle-eastern client base.
Indeed, majority of businesses specifically request female inclusion on a top table shortlist (often regardless of lower ‘ranking’) with a significant number, especially more recently, stating a preference for a female appointee.
So why is supply such an issue?
If we take a look at scholastic achievements, girls typically outperform boys, right up to A-Level standard. There are also more female graduates than male, and their average classification is again higher. Even through the progression from junior to middle management, women typically have the better of the male counterparts. Looking at the average sub-£70k shortlist, ceteris paribus, women outnumber male inclusions.
Once we progress from middle-to-senior management however, that balance shifts. With £six-figure shortlists, males dominate and by the time we break £150k (still well below the pay-grade of Lord Davies’ top-250), 90% of genuine contenders are male.
Again, Europe is no better. As stated above, 13.7% of board members of large firms in the EU are female, (8.5% in 2003). Female CEOs/Chairs/Presidents are even rarer: just 3.2% of the total (1.6% in 2003), well behind the 7% in the UK. Yet mirroring the UK, women account for 60% of new graduates in the EU, and enter many occupations in roughly equal numbers with men.
The biggest blame for this might lay with mother nature and society (and the women themselves). A late-20s male middle manager is 3 times more likely to relocate or work away all week than a female. By the time we get to late-30s, men are over ten times more likely to genuinely consider relocation or a weekly commute than their female counterparts.
Human Biology and family considerations (and traditions?) are a major factor, but even pre-family, women are significantly less likely to relocate. If you take a look at the current directors of FTSE-350 businesses, well over 80% have had career forced relocations with over 60% having done so more than 3 times. Relocation is not the sole driver here, but it gives an indication of how career ranks against other drivers within the different genders, rightly or wrongly.
I have undertaken two general management processes this summer, both nearing conclusion, both with a stated preference for a female appointee. Both processes have stringent criteria, need great time commitment from the appointee and both recognise that the bulk of prospective candidates currently live outside a commutable range.
Both process longlists were 45% and 60% female respectively. Yet over 90% of female contenders rejected the opportunity solely on the basis of (re)location compared with just 25% of male. My clients will get their woman, but it will not be a solely natural process and has taken many times the work to find and coerce female candidates to consider.
Another insight can be gained by looking at the average gender split in trade associations. On average, only 12% of trade associations members are female. Such associations claim membership is a commitment to a profession?
One of the stated strengths of female directors can also be one of the shackles. Caution. Many reports have stated that female directors are more risk-aware, and consequentially, more risk averse than their male counterparts. A great strength in prudent business, and even more so in times of economic turmoil (the same Credit Suisse report shows that businesses with female board members typically have lower gearing)…..and yet, with two female directors out of 10, Barclays exceeded the average and came close to the magical 25%. It didn’t help them a great deal?
However, that same risk averse, cautious attitude can leave women lower down the corporate ladder less open to risk when it comes to their own career, having a fatal knock-on effect as peers continue to climb.
Even when women DO ascend to the highest ranks, the opposition they face, especially from other women, is enough reason to dissuade other women from following the path. Take a look at the venom directed at Marissa Mayer for having the audacity to take on the Yahoo! CEO role despite being 6 months pregnant, despite her position as the best man for the job.
Are quotas the answer?
No. Emphatically no. Aside from the raw fact that imposing quotas itself creates discrimination, it is ludicrous to suggest that forcing business to adopt a significant minimum number of women on boards of directors will even work, let alone be beneficial.
Raving quota supporters such as Cosmo Editor Fiona Cowood will cry that the economy is screwed and in a double dip recession, trying to make out that the current board structure is to blame. Even ignoring the Barclays issue above, if the supply of female directors is already stretched, how can the forced introduction of less suitable candidates (or any minority/demographic grouping) help the situation?
There isn’t even public support. IBTimes commissioned a survey to gauge opinion on quotas for women on boards, only 17% in any way agreed with such a quota and only 13% would support the introduction of such a quota…..yet 61% said there should be a fair representation of women on boards.
So just about everyone recognises that there should be more women on boards, but it just isn’t happening.
‘Pro’ protesters argue that it is bigotry, prejudice and raw sexism. I don’t doubt it exists, but only in the very minority of occasions. It boils down to supply.
Vanessa Valley (CEO of women’s network, http://www.wearethecity.com/) poses an interesting argument. She asks why should women aspire to be on boards anyway? Do women simply not need the ego trip of the top job? She says only a tiny handful of the women she asks have any interest, or even comprehension on what being on a board entails.
Vanessa argues that too much emphasis is placed on ‘women on boards’ now, rather than how we spend the next 10/15 years educating the future talent pool. You can’t create 300 female board members overnight, they need a decade, maybe 2 of development to be there by rights. “If we can work together to ensure our future generations of talent obtain the experience, skills and network they need to reach senior positions, we may well build a culture of women that aspire to and are able to operate at board level.”
There is no doubt, there are less women sat around board tables than there should be, but forcing the issue through arbitrary targets and quotas is not the answer. The drive has to be to develop a generation of female leaders worthy to take the fight to their male counterparts and creating a natural fairly equal split. As Vanessa says “Forcibly throwing a number of women in the mix is not necessarily going to fix the problem.”
Quotas are seen by many women as an insult – to suggest that they are not able to gain such positions on merit, needing meddling politicians and arbitrary statutes to give them a peg-up? Surely someone with such Pro-Feminist views as Martha Lane Fox and Fiona Cowood should abhor such a notion? Or does the end justify the means? Is this just about stats, not about the positive impact on business?
But the pro-quota brigade are insistent, despite the argument that making major unnatural, forced changes to top management during the ongoing eurozone crisis is near lunacy, indeed the proponents often suggest that the lack of female representation is a/the cause of the eurozone crisis, and that forcibly redressing the balance to the magical 25% (or 40% for the EU as a whole) will resolve the crisis. It still doesn’t address how you suddenly find twice as many suitable female C-Level execs than exists today?
The challenge of increasing female representation is very real, as is fair representation from all walks of society, but has to be done through natural means, not forced, ill thought-out quotas. Once we introduce quotas for gender, what happens to ethnicity/race? Or sexual orientation? Or using the Paralympics as a current topic, disability? We need to ensure genuine meritocracy. The best Man needs to get the job, all applicant just need to become that best Man.
What’s more – as soon as you introduce set quotas, or even a set target, businesses will simply get around it. My prediction?….. We will hit 25%, but businesses will just fudge the figures and recruit/create a load of female Non-Execs to do a day per month of listening to Exec Directors talk around the board table. No real impact, but a box ticked. Witness the phenomenon in Norway where the 40% target is primarily made up of ‘Golden Skirts’… Women that hold dozens of NED roles (up to 100 in some cases) to aid businesses comply with the quota.
Businesses need to be left to run themselves, to make their own decisions and to subsequently live or die by their actions. One-size-fits-all quotas interfere disproportionately with the freedom and ability of companies to organise their own affairs, in good times and bad. They disregard the highly diverse conditions in different regions/sectors/companies and do not take into account the way corporate boards function and are renewed.
Centrally forced 25% female boards are not the answer. Just ask Barclays.
*** Update*** – You can hear me discuss the topic on BBC Radio Manchester, 17th September from 5.30-6pm.