Almost all directors says diversity on boards is good but many still refuse to act on it
How long must we keep talking about the lack of gender diversity at the top of business? We have seen anguished reports from governments, ambitious industry targets and, in some countries, formal quotas. Yet the proportion of women on corporate boards and in the C-suite remains distressingly low.
When Emma Walmsley takes over at GlaxoSmithKline, the FTSE 100 will have seven female chief executives. There are just 14 women atop Europe’s 350 largest public companies and 23 female heads of S&P 500 companies.
Diversity on overall boards is better: just over one in four FTSE 100 board members is a woman, as are 20 per cent of directors running the S&P 500. But new female appointments have hit a five-year low in the UK. Last year, in the S&P 500, about one in four companies had one or zero female board members.
All this comes despite a body of research, including reports from consultancy McKinsey and Catalyst, the advocacy group, that shows companies with a diverse leadership manage change more effectively and provide higher total shareholder return.
A PwC survey this week helps explain why the drive for gender diversity seems to be slowing. The professional services firm surveyed 884 board members of US public companies. Almost all said diversity “is important”. Yet when PwC drilled down, the answers were revealing. Just 24 per cent of male board directors thought diverse boards improved company performance and only 38 per cent thought they made boards more effective. Worse, 10 per cent of directors (overwhelmingly male) said the ideal share of women on boards was 20 per cent or lower.
This week a group of UK investment managers decided to hold feet to the fire. Five fund groups, including Jupiter Asset Management and Old Mutual, declared they will vote against board appointments in companies with too few women executives.
In an initiative organised by the 30% Club, which campaigns for greater representation of women in corporate senior management, the fund managers said they plan to vote against reappointment of board chairmen and chairs of nominating committees at companies that fail to make progress towards gender diversity. “I wish we didn’t have to keep talking about this but we have 50 per cent of the population that isn’t feeling utilised,” says Deborah Gilshan, head of sustainable investment at Railpen and co-chair of the 30% Club’s investor group.
Quotas and investor threats are crude tools. Their focus on a few senior jobs all but invites cheating from companies that do not really care about diversity. It is easier to poach senior women from other companies than to nurture your own, and cynics can appoint a few women to “soft” positions such as human resources and communications.
The 30% Club campaign itself has a whiff of hypocrisy about it. After all, the asset management industry as a whole is no better and might be worse than the companies it is criticising. Fewer than one in 10 UK funds and less than 3 per cent of US mutual funds are managed or co-managed by women.
The reality is that most companies do not make an effort unless forced. Norway was one of the first countries to use quotas: in 2003 it imposed a requirement on public companies to appoint women to 40 per cent of board slots by 2008.
Business lobbyists claimed it would be impossible to find enough qualified women, but a 2014 study found that those appointed after the reform had higher academic qualifications and more powerful jobs than the women who preceded them.
Sissel Jensen, a Norwegian School of Economics professor and one of the authors of the study, says companies “managed to find better qualified women when they had to. They professionalised their search process. If nothing happens, organisations will continue as they always have. As soon as it becomes costly, they make the effort”.
The rest of Prof Jensen’s study was less encouraging. Norway’s quotas did not lead to more women in other top positions nor did they close the gender pay gap or increase enrolment of women in business schools. She hopes the next update, which looks at a longer period of time, will show a wider effect.
Women in Business
Slow progress in the CEO ranks
I am not sure it will. While it is important to highlight the dearth of women at the top, the problem is systemic. The pipeline of women who have the experience and qualifications necessary to hold top jobs remains far smaller than the parallel stream of men. Lack of childcare, unconscious bias and different life goals all play a role.
But the onus is on companies to find ways to retain women throughout their careers, including the crucial period between ages 30 and 45 when so many women opt to change companies, leave the workforce or shift to less demanding work schedules. Keeping these women in their jobs is not just the right thing to do, it is the smart thing to do.
McKinsey estimates that if women played an identical role to men in labour markets, global GDP would grow by as much as $28tn, or 26 per cent, by 2025. That is optimistic: someone needs to pick up the unpaid family duties at present assigned overwhelmingly to women.
But in a world where women are earning half or more of all university degrees, a more equitable division of family and commercial work makes sense. Any company not addressing this problem is throwing away one of its most important resources.
Then and only then can we change the subject.
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