The tension between the need for regulation to protect employees and businesses' desire to cut red tape has never been more apparent than in today's economic climate. A central pawn in this debate is equality. There is debate on two key fronts – the drive to get more women into the boardroom, and the effectiveness of current discrimination legislation in light of the coalition Government's pledge to become "the most family friendly in Europe". The Commons Business Innovation & Skills (BIS) Select Committee last month launched a new inquiry into women in the workplace to explore just these issues.
Women in the boardroom
In February 2011, Lord Davies published his Government-commissioned report, Women on Boards. The report was not about promoting equal opportunities, but about improving business performance. It identified four components of the business case for securing more women on boards. Firstly, businesses lose some of their best talent if they fail to incentivise, support and promote senior women. Secondly, research indicates that companies with substantial female board representation outperform less diverse competitors. Thirdly, a diverse board is more responsive to the market, given that women make up 51% of the UK population. Finally, introducing more female executives helps businesses achieve better corporate governance by changing the dynamic and enhancing the independence of corporate boards.
Lord Davies recognised that the issue of underrepresentation of women on boards resulted from a myriad of different factors on both the supply and demand sides of the equation. On the supply side, he noted that while organisations are attracting female talent, they are failing to retain it. This is largely due to the arrangements made for women going on and returning from maternity leave, and the effect that such a break has on a woman's career momentum. On the demand side, the report addresses the barriers presented by boards recruiting in their own image (men tend to recruit men), a problem which Lord Davies at the time conceded was sexist. With so few board positions being advertised or filled through a transparent recruitment process (in early 2011 only 4% of listed board positions were being interviewed formally), such unconscious bias always risks being discriminatory.
In order to achieve a better balance of women in the boardroom, Lord Davies made a number of recommendations for listed companies, including that FTSE 100 companies should aspire to 25% female board representation by 2015, and that one third of all new appointments on listed boards should be women.
The success of the report was analysed by Lord Davies himself in a follow up paper in March 2012. The year since his report saw the biggest ever increase in the percentage of women on boards. If we were to continue at this rate there would be a record 26.7% female board representation by 2015. As Lord Davies recognises: "not parity… but a good place to start". However, Lord Davies warned earlier this year that the speed of change needs to accelerate sharply if businesses are to avoid Government interference.
The success, or otherwise, of Lord Davies' report is a key component of the BIS inquiry into women in the workplace. While the results of the inquiry have yet to be published, the question "why are there still so few women in senior positions on boards?" may give an indication of BIS's perception of the rate of progress made in the last 18 months.
Current discrimination legislation and proposals for change
The BIS inquiry also asks a number of other questions, including whether the Equality Act 2010 goes far enough in tackling inequalities. It also asks for evidence on the use of part-time working for men and women, and seeks ideas on how to encourage and ensure its success at senior levels. On the face of it, this may invite consideration of yet more regulation.
This highlights a tension in the heart of Government. On the one hand, the Government has stated that it is committed to cutting red tape and reducing the regulatory burden on businesses. On the other, it is committed to encouraging women in the workplace. Balancing these competing objectives has generated apparently conflicting policy measures. For instance, the Government has recently announced that it is standing by its proposal to allow further sharing of maternity leave and pay between mothers and fathers, despite the burden that this is likely to put on employers, and yet has also announced that it will allow businesses to offer employees as little as £2,000 worth of shares in exchange for waiving rights around unfair dismissal, flexible working and maternity. Similarly, it has indicated that it will abolish the statutory questionnaire procedure which allows a person who thinks that he or she may have been unlawfully discriminated against to obtain information from his or her employer, but is also taking steps to allow Tribunals to order employers who lose equal pay claims to conduct equal pay audits. Perhaps the positive measures taken by Government are designed to head off the need for a more fundamental legislative change – the introduction of quotas.
In a decision supported by the vast majority of its female respondents, Lord Davies' report shied away from recommending quotas to force through changes. Not everyone shares a belief in the concept of "aspiration not legislation" to tackle this issue, however, and Europe appears to be pulling in a different direction. Recent plans announced by the European Commission propose to force listed companies to reserve at least 40% of their non-executive directorships for women, or face fines. Countries such as France, which already has its own domestic quotas for female board membership, have come out in favour of the plans, while Britain and at least eight other member states are so far against it.
Quotas are perceived to be too close to (unlawful) positive discrimination for comfort in the UK, and risk making female appointments 'token'. The UK's approach remains to re-educate employers to realise that there is a significant and as yet largely untapped pool of potential boardroom talent amongst senior women, many of whom still struggle to sustain their career trajectory after maternity leave, despite (or as some are now arguing - because of) existing legislative protections.
Most would agree that discrimination legislation, including rights to flexible and part-time working and maternity and paternity rights, has played a key part in protecting women's rights at all levels in the workplace. There are some, however, that would beg to differ. The director of a right-wing think tank, Politeia, recently branded so-called "family-friendly rights" a misnomer, saying that paid maternity leave placed a "great burden" on both women and businesses and impeded women's progression to the boardroom.
The number of women in full time employment has increased by more than a third in the last quarter century. Flexible working and parental leave rights, equal pay legislation and protection against discrimination have all helped keep them there, a fact which risks being forgotten in the rush to cut red tape in a bid to stimulate economic growth. However, at the rates cited by the Equality and Human Rights Commission at the time of Lord Davies' 2011 review, it would take women another 70 years to achieve equal representation on FTSE 100 boards. It will be interesting to see whether the outcome of the BIS inquiry provides further insight into ways in which senior women can be better supported without the use of further regulation such as quotas. It will also be interesting to see whether businesses can be supported through difficult economic times without working women relinquishing any of the hard-won protections they enjoy today. Enabling working women to succeed at all levels, as Lord Davies recognised, is good for business.