Women on boards: time to target executives

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State Street Global Advisors, the world's third largest asset manager, installed this statue in front of Wall Street's charging bull statue as part of a campaign to pressure companies to put more women on their boards. It said it would vote against boards that failed to take action on gender diversity at board level © Christopher Penler / Shutterstock.com

The numbers of women on company boards worldwide has increased, but parity remains elusive. Lucy Trevelyan argues that corporate culture is still holding women back, and that focus should shift to female executives to make real progress.

It is widely acknowledged that gender diversity is good for business. There is a raft of evidence from the likes of KPMG, McKinsey, the Financial Times and more to demonstrate that companies with poor gender representation at board level have a lower return on investment, lower profits and lower share price compared with equivalent companies with more diverse boards. According to Peter Rees QC, 39 Essex Chambers and Chair of the IBA Corporate Counsel Forum, these companies ‘lose out on the bottom line, but also on the war for talent – increasingly, both men and women do not want to work for companies run solely by the male, pale and stale brigade.’

Culture and unconscious bias

Erika C Collins is a partner at Proskauer, New York and Senior Vice-Chair of the IBA Employment and Industrial Relations Law Committee. She identifies a ‘trickle up’ problem: boards are often selected from pools of existing chief executive officers (CEOs) and other top level executives, where women are already under-represented. Collins says the situation, particularly in the United States, is unlikely to improve any time soon.

‘The Securities and Exchange Commission had been considering requiring reporting of board diversity metrics [eg, gender, race and ethnicity]. Given the change in administration, and attendant deregulatory environment, it seems fairly unlikely that expanded regulations are going to happen. This is unfortunate especially since many executives have agreed that board diversity is vital to board effectiveness.’


Increasingly, both men and women do not want to work for companies run solely by the male, pale and stale brigade

Peter Rees QC39 Essex Chambers and Chair of the IBA Corporate Counsel Forum 


In order for women to be represented at the top levels of business from which board members are selected, there has to be a workplace culture in place that encourages and facilitates their progression to senior positions. Regina Glaser is a partner at Heuking Kühn Lüer Wojtek in Dusseldorf and Senior Vice-Chair of the IBA Discrimination and Equality Law Committee. She says that ‘corporate culture prevents [women] from getting into management positions, as men tend to support and promote other men and not women.’ This is exacerbated by unconscious bias, which can associate men with leadership positions. Tackling unconscious bias can be tricky, because it ‘is not at the cognitive level so is very hard to detect’, says Luiza Weber, partner at Interlaw member firm Carvalho, Machado e Timm Advogados in Brazil.

In a recent Thomson Reuters survey of 56 global firms, 55 per cent of respondents believed that unconscious bias was the biggest barrier to achieving gender balance on senior executive teams. An overwhelming 96 per cent also believed that unconscious bias creeps in at recruitment levels and remains consistent to mid-level management. ‘When the agenda is the rise of women in the economic and political area, extending to public and private sectors of business management, there is still a strong male presence and veiled biases that affect women’, says Weber.

In addition, board members often think they are doing better on diversity than they actually are. A recent study carried out in Austria examined the board structure of listed companies. It found that 75 per cent of respondents viewed their boards as gender diverse, when in fact only ten per cent of board members were female.

In order to rectify the current imbalance, ‘companies should provide greater access to information on available board positions through more public advertising’, says Enda Newton, partner at AMOSS Solicitors (an Interlaw member firm) in Dublin. ‘There should be further encouragement and mentoring for younger women and more women need to put themselves forward for directorships,’ he adds.

In a 2015 survey carried out by the Institute of Directors in Ireland, 62 per cent of respondents claimed that women are more reluctant than men to put themselves forward. Lack of contacts, lack of role models and lack of confidence were identified as the principal reasons for this. ‘Having more women in senior roles will assist in opening up the selection process for board membership… [to achieve this] companies should introduce a transparent selection process’, says Newton.

Mandatory quotas

The debate over how to address the lack of women in boardrooms often focuses on mandatory quotas. Some European countries, such as Germany, have embraced quotas: Germany introduced a quota requiring 30 per cent of supervisory board members to be female in January 2016.

As a result of quotas in France, female representation on CAC 40 company boards has risen from 17.4 per cent in 2006 to 42.6 per cent in 2016. The level of female representation at board level in France is now the second highest in Europe, after Norway. ‘Quotas have clearly helped to break the glass ceiling and have allowed for a greater representation of highly qualified and talented females on boards of directors’, says Pascale Lagesse, partner at Bredin Prat in Paris and Co-Chair of the IBA Global Employment Institute.


Having more women in senior roles will assist in opening up the selection process for board membership… [to achieve this] companies should introduce a transparent selection process

Enda NewtonAMOSS Solicitors


‘The increase in female representation on boards has also contributed to [greater] diversity overall’, adds Lagesse. A 2015 national survey by the Association des femmes diplômées d’expertise comptable administrateurs (AMF) observed that, on average, female board members were younger than their male counterparts. Annual reports have also concluded that female board members frequently have diverse cultural and professional backgrounds, and that more than half of 2016’s female board appointees in France were foreign.

However, France has not escaped the other side of the quota debate: ‘the perception’, says Lagesse, ‘[is] that women who have been appointed to a board of directors were selected on the sole basis of their gender’.

© a katz-/ Shutterstock.com

It is worth considering whether quotas bring about the right sort of change. Many quotas focus on the appointment of non-executive directors, which does not motivate companies to address workplace culture and how to promote women from within. It’s easy to draft in non-executives from other companies, which can mean that the same women serve on multiple boards, which fails to expand the female talent pool as a whole. In France, the AMF has highlighted ‘circumvention strategies’ used by some companies to avoid its quota. For example, decreasing the total number of board members to statistically increase the percentage of females on the board. Progress under quotas can be artificial. For example, despite the success of France’s board quota, ‘the gender pay gap remains a significant challenge’, says Lagesse. ‘With French women being paid almost 20 per cent less than men, the glass ceiling is still a reality for a lot of women.’

Progress without regulation

The other side of the debate on how to improve female representation at board levels focuses on softer, non-regulatory methods. Richard Silberstein is a partner at Gómez-Acebo & Pombo (an Interlaw member firm) in Barcelona. ‘Not all countries will respond the same way to regulation’, he says. ‘Each country has different levels of social acceptance of gender diversity.’

Silberstein advocates ‘tax benefits or reductions in [a company’s] social contribution’ as methods for improving diversity. Governments ‘could also give preference to companies which comply with gender diversity in public procurement.’


The best initiatives have been those in situations where customers or investors or other stakeholders themselves require a more diverse board composition

William F. CappsJeffer Mangels Butler & Mitchell, California 


Spain doesn’t have mandatory quotas, but the government has introduced a number of initiatives to improve boardroom diversity. In 2007, Law 3/2007 for Gender Equality set an eight-year term for companies to apply policies to achieve 40 per cent female representation at board level. Spain’s Good Governance Code of Listed Companies includes recommendations to improve diversity, including a goal of 30 per cent female directors by 2020. Reform of Spanish company law includes a provision to make the board selection process favour diversity in all its forms and to avoid bias. As a result, women now hold 19.83 per cent of the total number of boardroom positions within IBEX -35 companies, almost double the 10.56 per cent of women who held similar positions back in 2010. It’s not quite the 40 per cent aspired to when the law was changed in 2007, but ‘the trend is positive. The pressure of legislation and recommendations seems to be working, albeit slowly,’ says Silberstein.

Focus on executives

The United Kingdom currently follows a voluntary, business-led approach. Five years on from Women on Boards, a report into gender diversity in UK boardrooms, there are no longer any all-male boards in the FTSE 100. However, according to Egon Zehnder’s Global Board Diversity Analysis, the percentage of women being hired as directors in the UK fell from 32.1 per cent in 2014 to 29 per cent in 2016. The UK’s figures also lag behind most western European countries, such as Italy, France, Germany, Norway, Sweden and Belgium.

The Hampton-Alexander Review was published in the UK in November 2016. It sets out recommendations for improving gender diversity in the FTSE 350. These include a new target for FTSE 350 companies to achieve a minimum of 33 per cent women on their boards by 2020. Importantly, the report addresses the need to increase the number of women in executive positions, stating that ‘all CEOs of FTSE 350 companies should take action to improve the under-representation of women on the executive committee.’ It also extends the 33 per cent target to the executive committee and calls on investors to vote against the re-election of the Chair and the Chair of the nomination committee ‘where insufficient measures are in place in investee companies to address gender imbalance’. In a comply-or-explain system like the UK’s, this is perhaps the ultimate driver for change, as it is the responsibility of shareholders to hold companies to account. ‘The best initiatives have been those in situations where customers or investors or other stakeholders themselves require a more diverse board composition’, says William F Capps, partner at Jeffer Mangels Butler & Mitchell, California.

Role of in-house lawyers

As their role evolves beyond giving pure legal advice, in-house lawyers have an opportunity to influence their company’s attitude to diversity. For example, they could highlight the need for gender diversity on the board, review the company’s existing governance policies and propose amendments to encourage diversity in skills, experience and gender.

‘In-house counsel increasingly act as legal and business advisers to the CEO and senior leadership teams. They therefore have the ability to influence management thinking and bring about change’, says Newton. As such, ‘in-house lawyers have a real opportunity to play a key leadership role in terms of company diversity’, says Lagesse. 

In-house counsel could ‘help support the implementation of an internal company policy on diversity’, says Lagesse, ‘or promote best practice in terms of achieving diversity.’ For example, organising in-house workshops and training sessions covering discrimination in the workplace. This could in turn help to establish a workplace culture where diversity is created, enhanced and valued.

 Lucy Trevelyan is a freelance journalist and can be contacted on lucy@bluemoon-media.com