The number of women in the boardroom is increasing. But, says Lisa Buckingham, we need to ensure their presence goes beyond mere tokenism and that once they’re on the board, they stay there
The bunting should be out. It is 2015 and big British companies are within a whisker of meeting Lord Davies’s target for this year – that at least one in four board members should be women.
So why aren’t the corks popping and the champagne flowing? Although the Davies report of 2011 succeeded in putting the issue of women on boards centre stage for much of corporate Britain, it is now clear that if we are to maintain the gains to date – together with the better governance which many believe flows from improved diversity, and the evidence of improved financial performance – we need to broaden the debate.
Companies must renew their efforts to develop and nurture the pipeline of executive talent. They need to re-examine the longevity of tenure of those women who do make it to the top. And they must strive to have more than one woman on the board.
The latest Female FTSE Board report¹ published in March as part of the Davies report notes that women still hold only 8.6 per cent of executive directorships.
“We must shine the spotlight below board level and identify which executive pipelines are relevant to boards and how they can be nurtured. We need to apply to this issue the same discipline that was applied by the Davies report with regard to monitoring female non-executives,” says report author Professor Susan Vinnicombe of Cranfield School of Management, which compiled the report for the Department for Business, Innovation and Skills.
“The overriding belief is that unless CEOs now make [the pipeline] an operational priority, the availability of suitably qualified and experienced women to take up both non-executive and executive director positions will at best plateau and at worst decline.”
In fact, Cranfield’s predicted trajectory is that “a plateauing effect is to be expected as we approach 2020, with figures stagnating at around 28 per cent of women on FTSE-100 boards”.
The rate of board turnover – and the role of investors in this – is cited as one of the major factors inhibiting the appointment of more women. At its most basic, unless men can be encouraged out of the door there will be insufficient room for women to move in.
Interestingly, a new study carried out by the Cambridge Judge Business School on behalf of BNY Mellon² also highlights longevity as an issue – though they looked at the ability of women both to make it to the boardroom and to stay there.
This research discovered that boosting the economic power of all women in society was a key determinant of women reaching and staying on corporate boards. Perhaps unsurprisingly, factors such as expected years in education and participation in the workforce proved to have the greatest impact on women rising to the top of business.
In contrast, the research found that although quotas might help propel women into the boardroom they had no significant impact in keeping them there.
“Very few countries have quota legislation that is both mandatory and enforced, as it is in India and Norway,” says the report’s lead author, Professor Sucheta Nadkarni of Judge Business School. “As such, the results for quotas are based on a small sample relative to the study overall.
“However, what is very clear is that while quotas are unsurprisingly a very strong driver for getting women on to the board (and therefore having a high percentage of female board members), there is no significant relationship between quotas and the longevity of tenure for women. Our results suggest that quotas are of limited value in fostering an increase in female representation at board level.”
In fact, she argues, there is the possibility that quotas might increase the likelihood of a “revolving door” for those women involved. This, Nadkarni says, could actually damage the influence of women on the board as “for female board members to succeed and make an impact, they need to stay on the board and have the necessary infrastructure and support to remain there. Otherwise, their presence could be an issue of tokenism – when women are promoted to board level just for show rather than representing any serious efforts towards building a gender-diverse board.”
The Judge Business School study looked at companies from the Forbes Global 2000 list in 2013. Its end sample featured 1,002 companies from 41 countries across six continents and 51 industries. The research spanned 10 years from 2004 to 2013 – in that period the number of women on boards in the sample grew from nine per cent to 16.4 per cent.
Once distorting outliers – such as the 84-year-old daughter of the founder of a Turkish company who had been on the board since 1964 – had been excluded, it became clear that Mexico, Hong Kong and the US had the longest-serving women directors, averaging between seven and eight years. (No information was provided on the average longevity of male directors).
According to Nadkarni, the strongest drivers for the percentage of women on boards and their longevity are economic power and the inclusion of a diversity requirement in corporate governance codes. “Our results confirm the normative value of corporate governance codes in creating gender inclusivity,” she says.
“However, the finding on female economic power is particularly interesting because it captures the importance of female empowerment in broader society through increased education and participation in the labour force. The report suggests that as women become more educated and employed and play a more prominent role in the marketplace, firms will take more efforts to create gender-inclusive boards that better reflect the markets they serve.”
While education levels and participation in the workforce are good indicators of the likelihood of women rising to the top, it is just as clear that the process of raising ambitions for business has to start sooner in schools.
As Dame Ann Dowling, the first woman to head the Royal Academy of Engineering, told the Sunday Times: “Kids make life-influencing decisions far too early, before they have thought about what they want to do and therefore what options they close down. There are routes into engineering without A-level physics but it gets harder. There’s a big chunk of women who have already decided.”
Lady Barbara Judge, the new chair of the IoD, also believes passionately that young women’s horizons should be kept open by helping them experience female role models, and by encouraging schools to include business, as well as personal, finance on the curriculum. “I would like young women to say they want to be a CEO just as often as they say they’d like to be a doctor or a lawyer,” she says.
Diane Vernon whose charity Employability UK works with schoolchildren, adds: “Career learning, especially for female students, can help them develop the knowledge, understanding and skills they need to make successful choices. Many young women have the academic potential to get a job but lack networks, ambition and the confidence of their male counterparts. Some of the most positive feedback we received during a recent pilot of high-impact mentoring was from young female students who had the benefit of a mentoring experience with professional businesswomen.”
As the Female FTSE report shows, however, business may not currently be structured in a way that appeals to the younger generation of women (and men, come to that). Where are the flexible ways of working those now leaving university are looking for? As one (anonymous) chief executive told the survey team: “Does leadership presently look like something exciting, attractive and worth busting the social stereotypes for?”
The report adds: “There was recognition that changing culture involved systemic change which would take a number of years to achieve and which may also involve rethinking/redefining the meaning and role of leadership in general and directors’ roles in particular.
“Part of the new inclusive leadership comprises more knowledge sharing, openness and continued reporting and transparency around diversity, at all levels of organisations and including pay-gap metrics creating cultures whereby people work together constructively rather than compete narrowly against each other.”
The Judge Business School study suggests that the way in which culture affects women’s business success goes wider – that a country’s cultural beliefs and value systems are also important drivers of women’s rise to senior business positions, if not their longevity once they arrive there.
Egalitarian countries such as the Scandinavian nations have more women on boards than nations such as the UAE, Japan and South Korea, where gender equality is less valued. Countries regarded as valuing nurturing, altruism, generosity and caring – again Scandinavia features prominently – produce more women directors than those such as Greece and Germany which score lower in terms of “humane orientation”.
But again this had little impact in terms of the longevity of women directors. Notably countries regarded in the study as “assertive” – Germany, the US and Greece – often produce fewer women directors, although those who do make it to board level tend to survive longer. As might be expected, the Judge research revealed that maternity provision and the representation of women in political roles were important indicators of women’s success in the workplace and their ability to stay there.
“Maternity provisions – which make it possible for mothers to remain in work, and for fathers to take some responsibility for raising children – are also positively correlated to the percentage and longevity of women on boards,” says Nadkarni.
“It is likely that these measures help to keep women in the labour market, and to help their progression towards ever more senior roles. Such expansion of the pool of women eligible to serve on the boards increases the chance of considering and finding women who fit the needs of company boards.”
The supply of women with “suitable” experience was also addressed in the latest Female FTSE report. Despite encouragement for headhunters and chairs to look outside traditional businesses and consider women entrepreneurs, civil servants, academics and charity workers, for example, this has had little impact on the end appointments.
As one (anonymous) interviewee told the Female FTSE team: “I don’t think the net has been widened enough for placing diverse candidates. In the last 10 years there’s been the comment that we should have leaders from our biggest charities on PLC boards. Well, there’s been precisely one [Jasmine Whitbread, chief executive of Save the Children International, is a non-executive director at BT]. It’s still women from pretty traditional backgrounds with an audit credential and someone who’s been a chief financial officer.”
The lack of women appointed to lead nominations committees has been mentioned as a factor behind boards’ unwillingness to look beyond their traditional recruitment pools. On the supply side, chief executives are being urged to be more creative in providing women executives with profit and loss and operational experience, as most women in senior roles are to be found in central support functions such as HR, marketing and finance.
By continuing to draw from a limited range of skill sets, companies may tick the gender box, but they risk missing the real benefits of broader diversity, such as the improved decision making that arises from challenging traditional group think.
This is also a risk where there is only one woman on the board. Lord Davies very early set out his hope that boards would have two or more women, while the IoD’s Lady Judge says she always seeks to have two women at least on the board so that the dynamic really changes.
One of the chairmen who submitted comments to the Female FTSE inquiry commented: “I had worked on all-male boards, and the dynamics, the atmospherics, all of the things that are important in a boardroom from a cultural point of view, change.
They change a little bit when you introduce one woman. In fact, they probably change inappropriately when you introduce one woman because suddenly everybody is being desperately aware of gender. But with the second and third it’s gone, and what you then get is the healthy chemistry that we are all about as just human beings, and you get a much more constructive and, I think, productive environment.”
So, while significant gains in terms of boardroom gender diversity have been made in recent years, it is clear more needs to happen if these are to be real building blocks for the future.
There may not be much that can be done in the short term to change national cultures to improve the chance of women’s business success. Corporate cultures can become more open and more organisations can, as Lloyds Banking Group, Barclays or KPMG have, publish explicit targets for improving the representation of women executives.
The board appointments process can become less shrouded in mystery and headhunters can be more proactive in encouraging clients to consider non-traditional female appointments to the board.
Crucially the work of business to raise aspirations and make itself appealing to talented youngsters has to start in schools. As Lady Judge says, becoming a chief executive has to have a similar aura of excitement as becoming a vet or a top lawyer.
Longer term, the workplace flexibility that might encourage women to stay on after having children will increasingly be demanded by young people of both sexes and change will be imperative for organisations wanting to secure the best talent.
In the meantime, however, what is apparent from both the latest Female FTSE and the Judge Business School work is that business and political leaders cannot afford to let up, believing that the gains made to date are either good enough or sustainable enough without further change.
The most, the longest and the empowered
Countries with more than 30 per cent of women on boards 2004–2013
• Norway • Sweden • Finland
Countries with highest female longevity 2004–2013
• Mexico • Hong Kong • US • Brazil • Malaysia
Countries with highest female economic power 2004–2013 (expected years of education and percentage of women participating in the workforce)
• Australia • Norway • Denmark • Finland • Ireland • US • Sweden • Netherlands • UK • France
Watch Lady Barbara Judge in conversation with WXN founder Pamela Jeffery
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Sources: 1. Female FTSE Board Report 2015 – Cranfield Business School/BiS 2. Global Drivers of Female Representation in the Boardroom: Cambridge Judge Business School. womenomics.co.uk
To email Diane Vernon or find out more about EmployAbility click here
Join some of the UK’s most inspirational businesswomen at the IoD’s Women in Business Conference on 15 November at 116 Pall Mall, London. The event is a chance to listen to the success stories of female business leaders – and learn about the challenges they have faced in the rise to the top.