Diversity: time to change the conversation

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Dina Medland argues that achieving cultural change throughout business, of which diversity is one aspect, is more important than meeting targets.

It’s been more than four years since Lord Davies of Abersoch launched his review, Women on Boards, to consider the under-representation of women at the top of the United Kingdom’s listed companies. In his latest annual report, Lord Davies revealed that female representation at board level in the UK has almost doubled, to 23.5 per cent: just short of the 25 per cent target he set, to be achieved by the end of this year.

In those four years, amid a regular spate of updates from a variety of sources, there has been much praise for the UK’s voluntary approach to rectifying the boardroom gender balance. Hailing the latest report, the UK’s former Business Secretary Vince Cable said: ‘We must celebrate this outstanding achievement and the change in culture that is taking hold at the heart of British business’.

‘I am confident we will reach our target this year, but our work is not complete,’ he went on. ‘British business must keep its eye on the long game, as we strive to achieve gender parity. We have made good progress in the last four years, and if we continue…  I would expect to exceed a third of female representation by 2020. We know that’s where the tipping point lies in influencing decision-making’.

Recent quarterly findings from the executive search firm Sapphire Partners revealed UK female executive appointments up 19 per cent and female non-executive director (NED) appointments up 20 per cent. Sapphire also pointed out that 22 per cent of NED appointments were women appointed to their first NED role at a public company, showing new talent was coming through.

However, female departures over the same quarter also inceased by 33 per cent. Putting the quarter into context: over the last year 595 women were appointed to NED and executive positions, while 127 left senior roles in the FTSE 100 and FTSE 250, as well as professional service companies and the not-for-profit sector, according to Sapphire.

This focus on hitting number targets stems from the UK’s preference for a ‘voluntary’, rather than a ‘pressured’ route to gender parity. Meanwhile, in the rest of Europe, Norway, Denmark, the Netherlands, Spain and France have all opted for quotas as a means by which to move towards greater female representation. In early March, Germany passed a law making it compulsory for the country's biggest companies to appoint more women to their boards. From 2016, around 100 of Germany's largest businesses must ensure 30 per cent of their supervisory boards are women.

The European Commission is now seeking support for a 2012 Directive, first proposed by its former Vice President Viviane Reding, which would oblige member states to take concrete steps towards establishing a process designed to achieve gender equality at board level. This would not mean quotas – or binding targets – but the application of ‘gender neutral and unambiguous criteria’ when assessing potential board members, following which priority is given to the candidate of the under-represented sex.

Appointments process

It could be argued that in its determination to resist quotas, the UK has focused its attention on hitting targets and boosting numbers, without sufficiently addressing the appointments process, and whether it is fit for purpose. Susan Vinnicombe is Director of the International Center for Women Leaders at Cranfield School of Management, whose annual Female FTSE Report benchmarks the progress of women onto corporate boards in the UK.

‘Until we become a bit more open about accepting women with different experiences [of the workplace], it is going to be very difficult to significantly push this [movement for gender equality] forward,’ she said recently.

The selection process for boardroom appointments has not changed significantly: it predominantly looks for those who have existing experience of a publically listed company. For example, even though there is an acknowledged shortage of technology experience at the top of many businesses, little has been done to address this, despite there being a wealth of female expertise in this field among established entrepreneurs.

For many executive search firms, female executives remain the preferred choice as NED candidates for other companies, which means that the talent pool from which to appoint remains artifically small. The latest figures from the UK Department for Business, Innovation & Skills (BIS) reveal that just 8.6 per cent of executive directors in the FTSE 100 are women, while in the FTSE 250, it’s an even smaller 4.6 per cent. No wonder companies argue that there is a limited number of female candidates for boardroom positions, based on this restricted view of what it available to them.

If UK companies and their boards’ nomination committees were serious about achieveing  gender diversity for better business, they would look beyond hitting targets and find innovative ways of seeking the right female talent. For example, there is the option of creating boardroom advisory positions, where there is a critical need for specific talent – such as in addressing cyber risk. This could be a more evolutionary way of introducing new skills and new perspectives into the boardroom.

The UK may be edging closer to its own targets, but it seems premature to talk about ‘the change in culture that is taking hold at the heart of British business’. Like so many issues facing business today, numbers and targets are meaningless if they don’t reflect a deeper cultural change. While even the selection process for boardroom candidates continues to focus on the same type of people, with the same sort of experience, nothing has really changed, and the targets met are purely superficial.

As Yasmine Chinwala at the forum and think tank for better capital markets, New Financial, argued recently, the existence of true diversity is a fundamental indicator of wider cultural change. The financial services sector and wider capital markets are at risk without diversity. Yet, as New Financial’s research shows, women are under-represented at the highest levels of decision-making in the European capital markets.

‘Addressing diversity in the capital markets could be an important way for the industry to show that it is is willing to embrace change and take steps to improve its culture – before it is forced to do so by the regulator,’ writes Chinwala

Dina Medland is a freelance journalist and can be contacted at dinamedland1@gmail.com.