by Rachel Suff, CIPD Adviser (Employment Relations) and Dianah Worman, CIPD Adviser (Diversity)
'There are more women on FTSE 350 boards than ever before, with representation of women more than doubling since 2011 – now at 26.1% on FTSE 100 boards and 19.6% on FTSE 250 boards.' So reads the front page of the five-year summary from Lord Davies on the Women on Boards Review, published in October 2015. The aim was to increase representation of women on FTSE 100 boards to at least 25% by 2015, so it is excellent progress that the target has been exceeded.
The five-year summary flags up another important achievement – a 'dramatic reduction' in the number of all-male boards. In 2011, there were 152 but today there are no all-male boards in the FTSE 100 and only 15 in the FTSE 250.
New targets going forward
Lord Davies has extended the national call for action and a 'voluntary, business-led approach' to continue for a further five-year period to improve female representation at board level among FTSE 350 companies. This call for continued action is welcome. The five-year review also increases the voluntary target for women's representation to a minimum of 33%, to be achieved in the next five years. The 33% target applies to all FTSE 350, and not just FTSE 100, companies which is a progressive step.
Having achieved the 25% representation target for female board members, it makes complete sense to raise the target going forward. But should business be aiming for a more ambitious target than a further eight percentage points in gender diversity over a five-year period? While it can become harder to achieve ever-higher targets year on year, if women make up just one-third of board membership this level of representation still falls significantly short of gender parity.
The CIPD Manifesto for work, published in March 2015, called for a new target of 40% for boardroom gender diversity for 2020. When we surveyed our membership earlier this year, the majority opinion was to aim even higher - more than half (53%) of the HR professionals who took part in our survey said that the Government should set a more ambitious voluntary target post-2015. We asked respondents what they thought the new voluntary target for female representation on boards should be: a voluntary target of 50% was most popular, with 36% indicating this equal level of gender representation.
Future action should be focused on executive roles
Another welcome recommendation in the five-year Lord Davies' review is a focus on the 'executive layer'. It encourages FTSE 350 companies to 'look to fundamentally improve the representation of women on the executive committee and senior-most leadership positions.' While the 25% target for female representation has been exceeded, it is disappointing that the five-year summary reveals that the proportion of women in executive FTSE 100 board roles remains low at just 9.6%.
That companies should focus energy and resources on improving female executive representation has been a consistent policy call of the CIPD. This is because it is the influence of female role models in executive positions that has the potential to create the greatest sea change in organisational attitudes and practices around gender diversity and female progression. The proportion of executive director posts that are held by women is also the key litmus test of the organisation's success in developing a strong and sustainable female talent pipeline that lays the foundation for senior female succession to the top. Therefore, our 2015 Manifesto calls for a separate 20% target for female executive directors in the boardroom.
Lord Davies is right when he says that increasing the number of women in executive seats would always be the longer-term challenge, as these are often the highest-ranking and highest-paid roles in any FTSE company. However, this is where action needs to be prioritised if companies are going to reap the long-term benefits of gender diversity.
Equality by voluntary or compulsory means?
The CIPD wholeheartedly supports the Government's voluntary, as opposed to mandatory quota, approach to gender representation restated in the five-year summary. As the report so aptly comments:
'…many people have said that the only way to make real change was to introduce quotas. Undoubtedly, quotas have driven faster progress where some countries have adopted them, but no one country has the perfect solution and it remains unclear as to whether these rapid routes to gender balance are sustainable, as well as in the longer term interests of women and business.'
The report also notes that only 11% of consultation responses were in favour of a legislative quota regime in 2011, 'making it clear that a voluntary, business-led approach was likely to win the support of key stakeholders.' CIPD members support this perspective – in our membership survey earlier this year, six in ten respondents (60%) told us that mandatory quotas should not be introduced.
Legislating to ensure that a certain number of women are appointed to board positions will not solve the underlying reasons for failures in boardroom gender diversity. As many HR professionals told us, a quota imposition could be counter-productive and lead to a potential backlash towards those appointed as a result of what is often perceived as positive discrimination. Our 2015 literature review, Quotas and targets: how do they affect diversity progress?, draws on evidence about mandatory quota systems introduced in different international contexts and explores the circumstances where this kind of approach can have either positive or negative outcomes, as well as the unintended consequences that could follow. People want to be seen as successful based on their own ability and not as a result of their identity. However UK evidence shows how voluntary targets – promoted by government and set by organisations themselves – engage employers to act to improve gender diversity and deliver progress.
A proposal for a new directive under negotiation in Brussels to improve the proportion of female non-executive directors raises the real spectre of a rigid and compulsory approach to boardroom selection. The EU initiative sets a minimum compulsory quota of 40% representation for each gender. The file is currently 'blocked' because not all EU member states, including the UK, are supportive of a mandatory quota system but it could still become a reality if certain compromises are agreed. As our 2015 EU Briefing on the initiative explains, a key impetus for it was the slow rate of progress in improving boardroom gender diversity: at the time of initiating the legislation in 2012, in the EU 85% non-executive board members and 91.1% of executive board members were men.
The prospect of an EU directive that imposes a mandatory system makes it imperative that more UK businesses steps up the pace of change for boardroom gender diversity, as there could be scope for the UK to continue to pursue its preferred voluntary route if it is effective.
It's not just about the top posts
We need to ensure that attention continues to focus on improving the level of female representation in the boardroom, or risk losing the momentum that the issue has started to generate. We also need to ensure that gender diversity is fostered at every level of every organisation – and not just in FTSE 350 companies.
Strengthening the executive pipeline raises crucial issues for all employers about how they can build a strong and sustainable framework to improve female representation. Addressing unconscious and institutional bias is pivotal. There is a whole raft of tried and tested options that can affect positive change such as those in the guidance from Telefonica launched last year and co-branded with the CIPD. These include fostering an open and supportive culture that supports diversity and inclusion, recruitment and selection practices to attract diverse talent, and work-life balance policies that support employees with caring responsibilities. Coaching and mentoring to support women's progression, female sponsorship and advocacy schemes and leadership development programmes for women are also effective.
To be successful in addressing the increasing war for talent, organisations need to be on the ball to keep abreast of their competitors. The default approach of not acting is to miss out and fall behind. To get ahead of competitors they need to be creative and innovative in ways that make business sense.