Opportunity Now's response to the EU Women on Boards Consultation


Blog by Helen Well, Opporunity Now, Director. Opportunity Now believes that the UK cannot risk wasting the talents of another generation of women and leaving the boardrooms of UK organisations without the diversity of skills, talents and experiences that will enrich decision making, enhance innovation and make us more competitive in the future.

Our response
Opportunity Now welcomes the chance to respond to this consultation. We have more than twenty years of experience working with businesses to increase the number of women on boards and this has allowed us to develop an expertise which forms the basis of our response detailed below.

For further information or clarification please contact Helen Wells, Director of Opportunity Now:

0207 566 8713
helen.wells@bitc.org.uk
www.opportunitynow.org.uk


(1) How effective is self-regulation by businesses to address the issue of gender imbalance in corporate boards in the EU?

A form of self regulation has been very effective in achieving sustainable, lasting change in the UK. Since the launch of the Lord Davies report on women on boards in February 2011 and following a three year plateau, the percentage of women on FTSE 100 listed companies has increased by 3% to 15.6%. The most recent figures indicate for the months of March and April 2012 that 48% of FTSE 100 new board appointments were women.

The increase is in line with what Lord Davies called for – equating to around one in three new board appointments in the last year going to women. This increase in the number of women on boards has been achieved without an increase in total board size. The options available to increase the number of women on boards are more complex than the binary regulation/self regulation implied in this question set. The “comply or explain” model being used in the UK as well as elsewhere has had a significant impact which we believe is sustainable and powerful, and which has been achieved with no threat to effective governance.

(2) What additional action (self-regulatory/regulatory) should be taken to address the issue of gender imbalance in corporate boards in the EU?

“Comply or explain” mechanisms have been successful elsewhere, such as Australia, and Opportunity Now believes that the changes to the UK Corporate Governance Code which are due to come into force this year will ensure that the positive increases and momentum already seen in the UK will continue. Real cultural and organisational change happens when organisations have made their own choices about goals and how they will meet them. Public reporting is a powerful mechanism and means that companies are accountable for those decisions. However, change will only be lasting where businesses are in the driving seat. Quotas might help treat a symptom in increasing the number of women on boards, but they don’t address the root causes of the leaking talent pipeline for women. Quotas do not promote ownership of change, buy-in or meaningful understanding. In Opportunity Now’s experience business led change is more effective, sustainable and impactful.

(3) In your view, would an increased presence of women on company boards bring economic benefits, and which ones?

Opportunity Now believes that diversity on boards is good for business and there is a compelling body of research which demonstrates the correlation. According to McKinsey, companies across all sectors with the most women on their boards of directors significantly and consistently outperform those with no female representation – by 41 percent in terms of return on equity and by 56 percent in terms of operating results. A study of the in the Fortune 500, Catalyst studies reveal companies in the highest percentile of women on their boards outperformed those in the lowest percentile by 53% higher return on equity, 42% higher return on sales, and 66% higher return on invested capital. Furthermore, a recent Danish study found that companies with good numbers of women on the board outperformed those with no women by 17% higher return on sales and 54% higher return on invested capital.

Thomson Reuters examined the performance of companies with more than 30% women on their board compared with those with less than 10% women on their board, and found that companies with greater numbers of women leaders fared better in periods of greater economic volatility.
Equally, over the course of 2011, companies in the STOXX 600 Index with more than 30% women managers outperformed those with less than 20% women managers by nearly 8%.

Evidence from Opportunity Now employers in the UK suggests that diverse teams enhance innovation and approach problem solving through a wider lens, while homogenous teams can suffer “groupthink” and are less effective at scrutiny, challenge and innovation. When management groups consist of people from similar backgrounds, executives are more likely to take excessive risks or fail to form contingency plans. Our evidence also suggests that diverse leadership groups are better able to deliver business solutions which appeal to diverse consumers and clients.

(4) Which objectives (e.g. 20%, 30%, 40%, 60%) should be defined for the share of the underrepresented sex on company boards and for which timeframe? Should these objectives be binding or a recommendation? Why?

The Davies approach was successful because it was based in data. The targets were set after calculations on board turnover, so the target for the increase in the number of women on boards was both realistic and challenging. Rather than setting a single arbitrary target to cover the whole EU Opportunity Now would support the development of an approach which gave listed companies clear guidance as to the progress they should aim to make over a given time period. We would not support a single target for every business to meet – one size does not fit all. We would not support a binding target. Progress on women on boards will be achieved through creating momentum and through working with companies to develop their own plans for change, not through legal compulsion.

(5) Which companies (e.g. publicly listed / from a certain size) should be covered by such an initiative?

We support an approach which sees publicly listed companies reporting on their objectives. It is not clear what effective mechanism could be put in place for non listed organisations, but it is worthwhile to encourage all companies to consider public reporting and objective setting as good practice.

Whilst there may not be as clear a mechanism for non listed companies and public bodies it remains important that the achievements of these organisations on women in leadership positions is monitored and recognised. The UK government has strong targets for women on public sector boards and many non listed businesses are Opportunity Now exemplar organisations, setting the pace of change and acting as role models for others.

(6) Which boards/board members (executive / non-executive) should be covered by such an initiative?

Non executive and executive board positions should be considered in any initiative, although different approaches may be appropriate for each.

(7) Should there be any sanctions applied to companies which do not meet the objectives? Should there be any exception for not reaching the objectives?

A sanctions regime will not be effective in the UK. As the voluntary approach is reaping dividends it would be inappropriate to introduce a sanctions regime at this point.