Women on boards: Quotas are a quick fix and only short-term
Ruth Sacks, November 27, 2013
On the face of it, the fact the proportion of women on FTSE 100 and 250 boards has increased since 2011 is progress. However, the figures behind this headline trend reveal the change has been almost entirely in non-executive directorships.
At 6.1% of FTSE 100 and 5.4% of FTSE 250 directors, the number of women in executive roles is still rather small. There is progress but it is happening slowly.
It's perhaps no surprise, then, that Germany has recently decided to go the way of quotas, but I remain sceptical about quotas. Quotas may well offer a 'quick(er) fix', but it can only be a short-term fix at best.
Addressing the cultural issues in employer organisations will impact more effectively so that women are regarded as equally capable of performing effectively at board level as men.
Quotas are not the only answer because they fail to address the underlying, often deep-rooted reasons as to why so few women move into board-level positions, reasons that include women's self-perceptions of the extent to which they feel they have the knowledge, skills and networks to move into board-level positions.
The increasing momentum in this widening (and national) debate about women on the board is very encouraging. High-profile figures such as Helena Morrissey, CEO of Newton Investment, and initiatives such as the 30% Club - an industry-wide group committed to achieving 30% female representation on FTSE boards by 2015 - are far more likely to foster long-term change than quotas or requirements in law. It's a case of focused goals for change and specific targets, achieving them in ways that build genuine engagement and commitment.
To support these initiatives Westminster Business School has introduced a new executive development programme, 'Women for the Board', designed to encourage women to move into board-level roles by facilitating their development of skills, knowledge and confidence.
Women can benefit from such focused development opportunities to advance further in their career progression. At the same time, initiatives including those led by the 30% Club, Opportunity Now's Project 28-40, and social media - especially Twitter - can go a long way towards shifting board-level reluctance to change culture and recruitment strategies.
Business schools have a key role to play in encouraging the next generations of leaders, female and male alike. Each generation has a different attitude. Part of our role is to provide students with the tools, skills and importantly the confidence to present their opinions and knowledge to senior people in the organisation who may have grown up in a very different working environment and culture and not see the world in the same way.
The business case for diversity on the board is well-documented. Research shows that companies with more women on their boards achieve a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity. Having at least one female board director appears to cut a company's chances of bankruptcy by 20% and two or three reduce the likelihood still further. Female directors tend to prove more responsive to the market, recruit more widely and ensure better corporate governance - surely a key requirement in the 21st century?
The media spotlight continues to shine brightly and strongly on the issue of women on the board. This helps maintain and increase the pace for change. To this end, the debate over quotas encourages this attention.
Ruth Sacks is programme leader for Women for the Board at Westminster Business School.