One year on from the publication of Lord Davies’ report on gender diversity in UK boardrooms, it is clear that while some progress has been made, a lot more can be achieved. But before resorting to compulsory quotas, what can HR do to improve the situation?
When Prime Minister David Cameron attended a summit in Stockholm in early February to find out how countries such as Iceland and Norway have improved female representation at board level, there was a suggestion that the Government was refusing to rule out the possibility of fixed quotas for women on boards.
Speaking before the summit, Cameron said: “The evidence is that there is a positive link between women in leadership and business performance, so if we fail to unlock the potential of women in the labour market, we’re not only failing those individuals, we’re failing our whole economy.”
In 2003, Norway became the first country to introduce quotas, under its so-called “golden skirt” policy, for 40% of directors of listed companies to be women. Iceland followed with a series of targets to have 40% female directorships on boards by 2013. While the UK is a long way from imposing actual quotas, Lord Davies recommended last February that FTSE 100 employers should have at least 25% female board member representation by 2015.
However, research from executive search firm Norman Broadbent recently revealed that, based on the existing rate of change, even the wider spread of FTSE 250 companies will miss that target by four years. The Norman Broadbent Board Index indicates that only one executive director in 18 is female, across all three FTSE indices.
Are official quotas the right solution?
Supporters of quotas believe that forcing employers to have a certain number of female board members will improve business performance and better reflect their customer and supplier bases. Critics are afraid that by imposing a rigid target, women who are performing well at board level may feel that they have been promoted for the target’s sake, rather than their ability to fulfil the role.
The legal situation
According to Caroline Stroud, co-head of the employment practice at law firm Freshfields Bruckhaus Deringer, it is perfectly legitimate to set aspirational targets for the number of women at board level under current UK law.
The Equality Act 2010 allows positive action in cases where two people are equally qualified (not just in terms of qualifications, but also their experience relevant to the role), meaning that an employer can choose someone from an under-represented category in their organisation ahead of another equally qualified candidate purely because they are in that category. “In this case, the employer is taking positive steps to address an imbalance,” she explains.
What is clear legally is that, at present under UK law, a mandatory quota is not permissible as this would be positive discrimination. To tackle under-representation of women at board level, the EU has suggested that it would consider introducing mandatory gender quotas to increase women’s participation in decision-making bodies, but this is not yet enshrined in law.
Emma Howard-Boyd, head of sustainability and investment at fund management company Jupiter, is a member of the steering group for investors on the 30 Percent Club, which promotes greater gender diversity on boards. “We’re not in favour of quotas, but the best person for the job,” she says. The “30%” referenced in the group’s title is a voluntary aspiration, she says, rather than a stringent expectation.
For HR professionals, the push towards increasing the number of women on boards is one that affects them both personally and in how they shape the make-up of their organisations.
Data from XpertHR shows that women in HR are already more likely to achieve executive positions in the profession than in other areas – accounting for 42.5% of HR directors, compared with 36.1% of directors elsewhere. As a predominantly female profession, improving gender diversity at the highest level should be a subject close to the heart of HR.
According to Angela O’Connor, CEO of consultancy The HR Lounge, there has been a tendency in the past for HR professionals to bemoan their lack of representation on boards. With greater focus on this issue than ever, taking a role in accelerating female board representation could be a real opportunity for them to show their mettle. “HR is in a position to do something about this. They should be leading the conversation,” she says.
But what practical steps can HR put in place to move towards greater female representation on boards? According to O’Connor, introducing quotas to simply increase the number of women on boards does not get to the root of the problem, much of which lies in the pipeline to board-level roles. She says: “I’ve spent the past few years being the only woman on the boards I’ve been on. So many of the informal networking opportunities that take place en route to a board position are male-dominated. HR needs to look at how to make these opportunities every bit as valuable as the formal ones, and cast the net a bit wider when they’re recruiting for secondments and suchlike.”
Neil Holmes, of Norman Broadbent’s Board Practice, agrees. He says: “We are finding that women are appearing on shortlists, but the supply on the executive side is still lower than it should be and this requires companies to invest in long-term cultural changes to ensure that in the future, women vying for executive roles have the depth and breadth of experience that is today more prevalent among their male counterparts; this must be about quality derived from retention and experience, and not about tokenism.”
An effective stepping stone into an executive board-level role is to take on a non-executive director (NED) role. As they generally require less operational experience, these tend to be an easier entry point for women, who may have had to take periods out of the workplace. The Norman Broadbent Index also shows that the proportion of female non-executive directors is increasing at a faster rate than executive directors: in the FTSE 250, 24% of new NEDs were female, compared with 7% of executives.
Savvy organisations should also look at the points at which women disappear from their organisation (usually to have a family) and put initiatives in place to encourage them to stay. Freshfields Bruckhaus Deringer, for example, has reviewed and revised all of its flexible working and maternity policies to ensure that retention of women is as high as possible. The firm also held a conference for its female partners recently, a strong statement of its commitment to retaining women and on promoting women into its most senior positions.
“We strive to promote more women in to the partnership and senior business service management positions, and to achieve better retention of women,” explains Caroline Stroud, co-head of the employment practice at the firm. Employees and partners are now undertaking unconscious-bias training, which makes them more aware of any underlying preconceptions they might have towards any minority groups, not just women. “Many organisations have the structural things in place to support women, such as family-friendly policies, but they are not addressing the cultural aspects,” she adds.
The UK may be currently a long way from meeting Lord Davies’ goals of 25% of women on boards, but there is plenty of work that HR can do on a practical and cultural level to make that target more achievable, without the need for quotas or tokenism.