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.
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