In August this year, the government announced both a new aspiration that, by the end of the Parliament, at least half of all new appointees being made to the boards of public bodies will be women and that Lord Davies of Abersoch had been asked to report on how government can remove obstacles to women making it on to the boards of listed companies.
In October, the Department for Business, Innovation & Skills launched an online call forevidence to seek views from across the business world, given the government's commitment to swift change in this area. The call for evidence asks:
- women are under-represented in the boardrooms of UK listed companies - why do you think this is the case?
- what impact do you feel greater gender diversity in senior positions may have for business?
- do you feel that a lack of gender diversity has caused any particular problems for you? If so, please describe
- please describe any steps undertaken by you to overcome the particular issue(s) you faced
- what actions might be taken to help achieve more women being recruited to the boardroom?
In the light of the government's very clear commitment to change, this is an issue which should be on every listed company's radar. It is not one just for the nomination committee either. Being able to make board level appointments depends on developing a broad range of candidates within the tiers below the board.
The UK Corporate Governance Code/Higgs Guidance
In the case of executive directors, disappointed candidates can potentially invoke sex discrimination legislation, but this is extremely rare. In general, the issue of board diversity in the UK at present is part of a company's corporate governance regime.
The UK Corporate Governance Code was amended in June, as it relates to accounting periods beginning on or after 29 June 2010, to provide a supporting principle that "The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender" (italics added). The Financial Reporting Council specifically made a reference to gender diversity here rather than just to accessing the wider talent pool. It was felt that a specific reference was required in order to "encourage the cultural change that has to be achieved".
In contrast, the ICSA review of the Higgs Guidance has produced a consultation draft which does not mention gender diversity specifically. The draft Guidance refers to the right skill sets, including the appropriate range and balance of skills, experience, independence and knowledge, diversity of psychological type and diversity of personal attributes, including intellect, critical assessment and judgment, courage, openness, honesty and tact, as well as the ability to listen, forge relationships and develop trust.
While the revised Higgs Guidance is still in draft form, the difference between the two perhaps highlights the difficulty when moving from high level principles to detailed guidance in implementing a diversity balance in the short term while maintaining a meritocratic selection approach.
The French approach
The French have already addressed the issue of low representation of women on the boards of both listed companies and large unlisted companies and are taking a regulatory route to reform. The law, which has been passed by the Senate and will be considered by the National Assembly shortly, will have a gradual implementation which would see French companies listed on a regulated market obliged to have at least one representative of each gender within six months, each gender representing at least 20% of board seats within three years, and 40% within six years. As an example of the penalties under the regime, in relation to the first target (one representative of each gender within six months), the appointment of a new board member in breach of this requirement will be void and payment of directors' fees will be suspended.
Several other European countries already have regulation on board diversity in operation.
- 6 August 2010: Lord Davies asked to build on the work carried out by Professor Laura Tyson in her 2003 report by:
- identifying the obstacles to women becoming directors of listed company boards
- making proposals on what action government and business should take to improve the position
- 8 October 2010: BIS launches "Women on Boards: Call for Evidence"
- 30 November 2010: BIS consultation closes
- by 31 December 2010: Lord Davies to present recommendation
- February 2011: business strategy flowing from Lord Davies' recommendations to be published
Outside the corporate sphere
In law firms, the statistics are slightly better. The percentage of female equity partners in the top 100 law firms is 21.8% (as against 12.2% in the FTSE 100 and 7.3% in the FTSE 250), but the numbers have been static for the last five years. Hogan Lovells (via legacy Lovells) is ranked second in the list of top ten firms by turnover when ranked for female equity partners.
At Hogan Lovells we have seen increasing numbers of women joining the firm and we believe it is important for the firm to continue developing initiatives and support mechanisms that will assist in developing and retaining female talent. In 2007, we established a Women's Network to encourage greater gender diversity and inclusion in the workplace. Through the Network's various activities, 'Women of Achievement Speaker Series', 'Informal Mentoring Scheme', 'Gender and Work-life Balance Committee', we have been able to provide Hogan Lovells women with access to inspirational role models who can influence their careers at an early stage and provide valuable networking opportunities which we hope in the longer term will continue to increase female representation in the firm at more senior levels.
Corporates might consider responding to the BIS survey setting out any difficulties they face in redressing gender balance within their organisations. It might also be helpful to give evidence of specific projects which have been undertaken to tackle the issue and evidence of how they fared.
The Equality Act contains "positive action" provisions that allow an employer to recruit or promote a woman in preference to a man in certain circumstances, if she is "as qualified" as the other candidate. The provisions are designed to help employers address under-representation of certain groups in their workforce. However, the coalition government has decided not to bring them into force at this stage. In responding to the BIS call for evidence it may therefore be worth highlighting the difficulty of combining increased representation of women and existing sex discrimination legislation.
There is also a threat of EU legislation in this area. The EU Fundamental Rights Commissioner, Viviane Reding, has told the European Parliament: "Equality in decision-making is not yet a fact ... I do not rule out the possibility of putting forward legislation in this area." This may provide further momentum to efforts to address this issue in the UK, unless the quota approach, as seen in other continental European jurisdictions, is preferred.