For those who are passionate about expanding the diversity of Britain’s boardrooms, 2016 is potentially a year of great opportunity – but there is still work to be done
We ended last year on an apparent high note. Lord Mervyn Davies, the outgoing chair of the government’s equality taskforce reported that, five years after his team was set up, his target of women accounting for 25% of FTSE 100 directors by 2015 was achieved. Women now make up 26.1% of FTSE 100 directors, up from 12.5% in 2011. This is no mean feat and a great demonstration of what concerted campaigning around voluntary targets can create.
We should celebrate this and highlight where boards took a leap of faith in their top-level recruitment. But it’s also important that we understand what lies beneath these headline figures. Over 90% of the new female directors appointed at FTSE 100 companies over the past five years have actually been non-executives.
Of course non-execs can have significant impact on a business but it’s of a whole different nature to being on the exec board and contributing to the day-to-day strategic direction. There is a current danger that the recruitment of female directors is seen as a tokenistic, politically correct move designed to minimise reputational risk, rather than a proactive strategy to improve business performance. As equalities minister Nicky Morgan has said – and I completely agree – “Women don’t want to be treated differently or seen as window dressing”.
In his final statement, Davies recommended that FTSE 100 companies should be working towards a target of 33% female directors by 2020. I’m with him that targets, rather than quotas, are the way to go. But I’d like to see the targets refined a little more. We should be focusing on expanding the diversity of the outlook of exec boards, giving positions of real power to people who are not white men. There are currently only five female CEOs running FTSE 100 firms, a figure unchanged throughout the Davies era.
Although I applaud the groundswell of change that Davies’ targets have set in motion, what we need now is much more sharing of stories of exactly how greater boardroom diversity benefits business to encourage more sustainable, effective change. We need to alter the tone of this debate away from a tribal, gender battle and start talking a lot more about how inclusiveness benefits everybody.
For example, a Harvard Business Review study back in 2006 quoted directors reflecting on the impact of having more women on boards. Men on the board of one company acknowledged “how terrific the discussions and richness of outcomes have been” and that with women’s voices, “there is a higher level of understanding of the business.” A corporate secretary noted that having three or more women on a board makes the dynamic “much more conversational and less hierarchical and, as a result, all the directors get better information.” Fewer than three, however, and the women found difficulty in getting heard.
The idea of three female directors being the key to change is also backed by Catalyst research, which found some considerable financial benefits of having a diverse board of directors. Then there’s the excellent McKinsey research that showed that companies prioritising diversity enjoyed a significant lift in profits. In the UK, it was found that every 10% increase in gender diversity on the senior executive team corresponds to a 3.5% increase in pre-tax profits.
Sharing stories and research like this means we can move the narrative beyond box-ticking and start exploring in detail what benefits greater diversity in business leadership can bring. This, in turn, will not only motivate boards as they consider recruiting from beyond the same old pool but will also bring greater inspiration to the next generation of female and non-white business leaders.
As many of us know from experience, you have to see examples of people who look and sound like you doing what you’d like to do in order to believe it’s possible. This is why mentoring programmes are so important but we need to extend the value of these by making more effort to circulate people’s experiences.
With greater awareness of how diversity affects both the bottom line and individuals’ experiences, I’m hoping that this will be the year that board-level inclusiveness moves from being politically correct to being a fundamental competitive advantage. Who wouldn’t want that?