UK boards need more women directors – but how?

Thursday, March 03, 2011 | Posted by: Ben Langford
Categories: Governance, Non-executive director | Tags: statistics, research, Board, compliance, FTSE 350, women, gender, diversity, female, review, rotation of directors, 30 percent club, quotas, Lord Davies, directors, representation, inclusion

Companies have a last chance to increase female representation on boards from 9% to 25%, with the threat of quotas if they fail to comply.

UPDATE [8 March 2011]: UK sees little progress in boardroom gender equality - according to the firm’s International Business Report (IBR) it is still proving difficult for women to rise to the top ranks of the business, with only 3% of the UK’s Privately Held Business (PHBs) being led by a female CEO. This compares to the average across the European Union of 10%. More key findings from the report are on our Elevate blog. Read on for FTSE 350 figures…

Women on boards: the figures say it all
Across the FTSE 350, less than 9% of directorships were held by women – almost half of which were non-executives in the FTSE 100 – according to our research into the corporate governance landscape of the UK’s leading companies.

Looking at the FTSE 250, often seen as a proving ground for the FTSE 100, more than half of all companies (56%) had no women on their boards, with women holding just 7% of director positions. Is this because these smaller companies receive less media attention?

We also see few women leading FTSE 350 companies as chairmen (1%) or executive directors (4%). Indeed there are only 43 female directors in total across the FTSE 350.

Breaking through the glass ceiling
While it is generally agreed that increasing the number of women on boards is a good thing, there is substantial debate about how to achieve this. Solutions range from imposing quotas (as practised in Norway and Spain among others, and soon to be introduced to France) to taking a more market-based approach of transparency and accountability.

Lord Davies’ challenge to boards
Many leading figures – including Sir Win Bischoff, Chairman of Lloyds Banking Group, Roger Carr, Chairman of Centrica, and Theresa May, Home Secretary and Minister for Women and Equalities – believe that, on average, at least 30% of board positions should be held by women.

Lord Davies, in his review of women on boards, has opted for a more realistic target of 20% by 2013 and 25% by 2015. However, with only 21 companies out of the FTSE 350 meeting the 25% target at present, there is clearly a huge challenge to improve these figures.

Taking into account multiple directorships, it means an increase in the number of women on boards from 217 to 617 – an extra 400 women to be appointed over the next four years.

Is this achievable?
Our research shows that, on average, a FTSE 350 board has nine directors with an average tenure of 4.3 years. These figures suggest that, provided sufficient suitable candidates exist, it is possible to significantly increase women’s representation on boards through natural rotation of directors.

Indeed Lord Davies believes that his targets and timescale can be met if a third of new board appointments are women.

We concur with Lord Davies that this should be a topic of discussion for all nominations committees, especially for those FTSE 350 companies with exclusively male boards.

• In the short term they should be able to demonstrate steps being taken to improve female representation at board level, including internal targets and the way they select candidates for directorships.
• Over the next two years they will need to demonstrate increased numbers of women on their boards.

In summary, we are hopeful that UK plc is able to increase the number of women on boards through its own actions. It is clear that the time for talking is over and the threat of quotas is sitting on the horizon.

Image: © Alan Cleaver

You might also find these posts useful:

* Women in the boardroom world map (infographic)
* Eight key changes in the UK Corporate Governance Code
* Professor Sandra Dawson on good governance