Lord Davies' Women on Boards review set a target of 25% or more women in the boardrooms of the top FTSE companies by 2015 but equality and diversity in the workplace still remains an issue and UK progress is slower than desired. Is self-regulation or legislative intervention the answer to achieving gender diversity in the future of work? Lewis Silkin discuss.
Equality and diversity
The issue of diversity in the boardroom continues to generate debate in the UK and further afield. Much attention has been paid to the business case for having more female directors and the best way that this can be achieved. However, a recent article by Joanna Barsh, director emeritus at McKinsey, has piqued interest with a shift in focus away from the merits and methods of achieving equality in the boardroom to the potential impact – on wider society as well as on individual businesses – of a world where men and women actually lead equally.
Barsh has spent many years with her McKinsey team researching successful female leaders. From this research she has distilled a leadership model that values feminine qualities. It comprises five key dimensions: “leading from a core of meaning; reframing challenges as learning opportunities; leveraging trust; mobilising others through hope; and infusing positive energy and renewal”. She calls this “centred leadership” and believes that this approach resonates with men too.
Barsh argues that men and women leading organisations together using the principles of “centred leadership” can have a profound and positive impact: creating cultures in which individuals thrive and feel valued, improving stakeholder satisfaction and enhancing trust in business. This in turn should lead to better financial results for businesses and, consequently, the economies in which they operate. Barsh predicts that men and women leading together in this way could produce results which could permeate wider society and “fuel the evolution of leadership…toward a future where long-term stakeholder value replaces short-term profit taking and creates a more equal world”.
There are some interesting ideas in Barsh’s article which naturally prompt a consideration of how close we might be to achieving equality of leadership between men and women in business in the UK.
Lord Davies’ Women on Boards review in 2011, set a target of 25% or more women in the boardrooms of the top 100 FTSE companies by 2015.
A recent report identifies the progress which has been made since the Davies review was published. In 2011, women made up only 12.5% of the members of the boards of FTSE 100 companies. As at October 2014, women account for 22.8% of overall board directorships; this has increased from 20.7% in March 2014. In addition, there are now no all-male boards in the FTSE 100 although there were eleven when Lord Davies’ report was first published and two as recently as March 2014.
Reaching the “25% or higher” target seems obtainable and is, no doubt, a positive step towards greater gender equality in FTSE 100 companies. However, we are still a long way from achieving parity between men and women in boardrooms across the UK. This is particularly so in relation to executive roles. The improvement in the overall figure for women on boards has largely resulted from increasing the numbers of non-executive directorships held by women. In October 2014, women accounted for 27.9% of non-executive directorships in the FTSE 100 but only 8.4% of executive directorships. To put this into context, there are currently only five female CEOs in the FTSE 100. The longer-term task in the UK, therefore, must be to diversify the executive pipeline. But what is the best way to achieve this?
Self-regulation or legislative interventions?
Lord Davies reported that the overwhelming majority of businesses are in favour of “self-regulation” rather than legislative quotas or EU intervention in the quest for improved gender diversity in boardrooms.
At present, Lord Davies’ view is that the self-regulated approach is working in the UK and business-led approaches are increasing women’s participation on boards. However, his review makes it clear that if business-led approaches do not result in significant and sustained advancement in this area, quotas may be required in the future.
The vexed issue of quotas continues to be the subject of debate at the European level, where Member States of the European Union are seeking to address the low numbers of female directors. Although gender diversity progress is being made in most Members States, a recent report indicates that out of the twenty-eight Member states, only five (Latvia, France, Finland, Sweden and the Netherlands) have boards which are at least 25% female. On average across the EU, 18.6% of board members of the largest publicly listed companies are women and only 3.3% of these companies have a female Chief Executive Officer.
Owing to the perceived “slow rate of change” across Europe, the Commission has put forward a proposal (backed by the European Parliament) for a Directive establishing the objective of a minimum of 40% of each sex amongst non-executive directors by 2020. A business which does not meet this threshold, will have to apply gender-neutral selection criteria in the appointment process and, where a male and female candidate are equally qualified, prioritise the candidate whose gender is under-represented on the board. The Directive is currently under consideration by the EU Council.
The future of work - diversity?
Research suggests that the benefits of greater diversity at boardroom level are now widely accepted. Balanced boards benefit from a range of perspectives and experiences and have a greater capacity to understand all their customers’ needs, enabling them to be more effective.
Whether you are on the side of legislative intervention or a self-regulated approach, it’s clear that companies in the UK (and many in Europe) are moving in the right direction in terms of gender equality. But, there is still a lot of work to be done.
How can the positive changes achieved be sustained and built upon in the future? Measures such as quotas and targets are part of the solution. However, continued improvements in gender equality must be underpinned by real organisational change. This means that leaders, present and future, must genuinely believe that women and men leading together – equally – is the best way for businesses to succeed. Believing this will sustain future gender equality beyond the expiry date of a given quota or target.
But what about a wider approach to equality in the boardroom? Gender diversity is only part of the picture. We recently reported the UK government’s campaign to increase the number of individuals from an ethnic minority background at the top of FTSE companies. The campaign is still at an early stage and further details are awaited. However, it is expected that it will seek to mirror the kinds of initiatives borne out of the Davies review and encourage business-led, voluntary initiatives rather than legislative interventions such as quotas.
Barsh’s vision of men and women leading businesses equally based on the principles of “centred leadership” still seems a long way off. However, genuine progress is being made. We wait to see the rate at which it continues and how it can be sustained.
By Rhian Hall, Lewis Silkin
Are quotas the right tool to get more women in the boardroom? What measures have been taken in your workplace to increase to proportion of women at the top? Share your thoughts about boardroom diversity using the comments section below.
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