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Why quotas aren't the answer to gender inequality in the boardroom

Written by Frances Dickens on Friday, 23 October 2015. Posted in Diversity, People

From the risk of creeping objectives to their failure to tackle the underlying causes for gender inequality, Frances Dickens makes the case against mandatory boardroom quotas

Why quotas aren't the answer to gender inequality in the boardroom

Anyone who reads my column knows I have strong opinions about compulsory quotas for women on boards. In short, my view is that we don’t need them. And last week I made my case during a Women Leaders debate at the Institute for Government on the motion that recommends the introduction of quotas.  

Arguing in favour were Silvana Koch-Mehrin, founder of Women in Parliaments; Uschi Schreiber, global markets leader for Ernst & Young; and Dr Andre Spicer, professor of organisational behaviour at Cass. Arguing against were myself; Sue Owen, permanent secretary for the Department for Culture, Media and Sport; and Jo Swinson, non-executive director of data intelligence company Clear Returns. Ultimately those in favour of quotas won with 71% of the vote but my team put up a good fight. 

The pressure on Britain to introduce mandatory quotas is undoubtedly mounting. Among the major EU economies, the UK is alone in its pursuit of voluntary targets. A recent report by the LSE’s influential Commission on Gender Inequality and Power called for mandatory gender quotas for senior positions across the private and public sectors in the UK. So why shouldn’t the UK bow to this pressure and introduce quotas? Here are my five reasons:

 

Business-led change needs to be given a chance to work

The UK’s figure of 25% female boardroom representation is considerably lower than Norway’s where mandatory quotas came into force almost ten years ago and where female representation now stands at around 40%. However, the UK figure has been achieved via voluntary business-led change driven by Lord Davies’ high-profile review into Women on Boards.

Since the review launched in 2011, the number of women on UK boards has doubled. An interesting example of how business-led change working is mining company Glencore, the last FTSE 100 company with an all-male board. It was publicly lambasted by politicians and the media last year for failing to appoint a woman to the board, while investors declined to approve their reports or accounts for the same reason. The company bowed to pressure and appointed Patrice Merrin, albeit as non-exec director. This happened without mandatory quotas.

Quotas don’t advance the cause of gender equality

Equal opportunity is about men and women having an equal chance to compete for senior positions on the basis of qualification and merit. No one, male or female, wants to feel that they landed a job thanks to a quota system. In Norway, a lot of the roles held by women are reportedly non-executive positions and individual women often sit on multiple boards. These women are charmingly known as the ‘golden skirts’. This doesn’t sound like much of victory for gender equality to me.

The commercial case for boardroom diversity is a no-brainer

Evidence is mounting that gender diversity is good for business. A recent Credit Suisse report revealed that companies with just one female in the boardroom have seen higher return on equity (ROE) since 2005 than those with all-male boards. Similarly, according to recent Grant Thornton research, the opportunity cost of male-only boards for the UK alone amounts to $74bn (£48bn). Even without quotas, businesses clearly have plenty of motivation to increase boardroom diversity.

The risk of mission creep

If, as a government, you go down the route of mandatory quotas, where do you draw the line? Boardroom diversity isn’t just confined to gender; our boards aren’t ethnically diverse enough either. Can you set mandatory quotas for gender diversity but not ethnic diversity? And what about LGBT representation? Do you just stop at the boardroom or should you be setting diversity quotas for other levels of management? If so, isn’t this risking an unfeasibly high level of government intervention in how companies are run? 

Legislation is too blunt a tool to tackle gender inequality

The reasons for gender inequality at senior levels are highly complex and legislation is far too blunt an instrument to address them. For example, researchers at Harvard Business School recently interviewed 4,000 participants and found that, compared with men, women had a higher number of life goals but placed less importance on power-related achievements such as climbing the career ladder. I’m not sure this is an issue that can be tackled using mandatory quotas. 

 

So, in lieu of quotas, how should we attempt to redress gender balance in the boardroom?

 

Keep the Davies Review going

The recent news that the Davies Review is tipped to continue is greatly encouraging. Lord Davies’ report played a key role in achieving 25% representation of women on FTSE 100 boards and its success is a testament to the power of business-lead change over quotas. The rumoured next step will see a 25% target for women in executive director positions for FTSE 100 companies and the 25% target for women board members applied to the next 250 biggest companies. Meeting these targets will be crucial to maintain the momentum of change.

We must continue publicising the progress of the UK’s biggest companies as well as naming and shaming the laggards

Last month I was appalled to hear about two large companies, Hastings and Worldpay, preparing for flotation without female representation on their boards. Companies like this should be discouraged from joining the Stock Exchange until they have remedied the situation.

Keep researching the reasons that sufficient numbers of women aren’t reaching the top jobs

This includes the apparent conflict highlighted by the Harvard research between career advancement and life goals. How can companies, governments and pressure groups work together to solve this conundrum and enable women to balance their career and life ambitions?

 

To conclude, better boardroom diversity isn’t just good for women; it’s good for business, the economy and for society as a whole. Within the UK there is the commercial, cultural and political momentum to improve gender diversity at all levels within organisations without the need for mandatory quotas. 

 

This article was updated on October 26 to reflect the announcement that the recommendations of Davies Review are to be extended to a broader range of businesses.

About the Author

Frances Dickens

Frances Dickens

EB cover star Dickens set up Astus Group more than 10 years ago and it is now the UK’s biggest media barter company, working with over 200 major brands and almost all media owners. Frances pioneered a new approach to business through Astus, placing accountability, transparency, integrity and delivery on promises as central values. As an experienced entrepreneur, Frances has strong views on good business practice, including issues of sustainability, equality and the role of government in supporting the business community.

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