Lord Davies Review: Women on Boards

Emma Ritch from Close the Gap has provided some comments on Lord Davies Review on Women on Boards published today, 24 February 2011. The comments are summarised below.

 

1. The key issue of discord is quotas: Davies has recommended them as backstop measure, after a voluntary approach is tried. However, he does recommend amending the UK Corporate Governance code to require listed companies to publish, “a policy concerning boardroom diversity, including measurable objectives for implementing the policy, and disclose annually a summary of the policy and the progress made in achieving the objectives."

However, the UK Corporate Governance code is principles-based, and targeted at listed companies. Companies are not required to demonstrate that they have achieved compliance with the code.

The voluntary approach also includes; a charter; an aspiration that 'Chairmen' of FTSE 350 companies will set a target for female board members, to be achieved between 2013 and 2015; ditto for FTSE 100 companies, with the additional proviso that theirs should be at least 25 per cent (even though the evidence cited in the review suggests a ‘critical mass of 30 per cent or more women at board level or in senior management produces the best financial results’; executive search companies should develop policies around diversity.

The Recruitment & Employment Confederation (the representative body for recruitment agencies) Code of Practice does cover equality and diversity. They also have an equality pledge, developed in partnership with the Job Centre, which they ask recruiters to sign. http://www.rec.uk.com/about-recruitment/diversity/diversity-signthepledge

2. Davies reiterates the business case for increasing the representation of women on boards drawing on an increasing wealth of evidence, suggesting that, “the issues debated here are as much about improving business performance as about promoting equal opportunities for women.”

The familiar business case arguments such as capitalising on a wider pool of talent and utilising the skills and experience of women to challenge the homogeneity of decision-making in the boardroom, are all evidenced in the review as contributing to improved performance.

There are also some additional points. In Europe and the USA, women account for six out of every ten graduates, suggesting the career pipeline is leaking. Women in the UK are responsible for 70 per cent of purchasing decisions – having women on boards might open up new markets and ensure companies are responding to consumers needs effectively.

Interestingly, having a single woman on your board decreases your bankruptcy risk by 20%, and that having women on the board is negatively associated with bankruptcy across all business types, sizes of business, and age of business.

There is also discussion about women's presence improving and enhancing corporate governance, and mixed boards achieving objective corporate governance standards, and standards for strategy, earlier and better.

3. There is some interesting international comparator information in the appendices.