Why aren’t there more women in the boardroom?

2nd March 2011

Why aren’t there more women in the boardroom?

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Last week, the Department for Business, Innovation and Skills published Lord Mervyn Davies’ report on the lack of women on the boards of FTSE companies. It makes for interesting reading.

According to research studies quoted in the report, EU companies showing most growth have a higher proportion of women on their senior management teams, yet at the current rate, it will take 70 years to achieve gender balance in boardrooms in the UK.

As a consequence, Lord Davies, while not going so far as to recommend the introduction of a quota system, has made a number of recommendations to tackle this problem including setting targets for 2013 and 2015 to ensure that more talented and gifted women can get into the top jobs in companies across the UK.

You can read a copy of the report at http://bit.ly/ejC3b2

The report quotes a number of academic and non academic studies as to the performance of businesses with women on the board. Example studies include:

  • A study conducted by an asset management company in the UK which found that the operational and share price performance was significantly higher for those companies with women making up of over 20% of their board than those with lower female representation.
  • Companies with more women on their boards were found to outperform their rivals with a 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity.

The report makes some suggestions about why businesses perform better with women on boards. Homogeneity among board members tends to encourage what is called ‘Groupthink’: where everyone is from the same or similar backgrounds, with the same sort of education and experience, its members try to minimise conflict and reach consensus without critically testing, and analysing ideas. The introduction of people who do not share the same background or experiences helps create a more dynamic board.

What is fascinating about this report is there is such a weight of evidence pointing to the fact that having a balance of both men and women on boards and in senior management teams is good for business. What is not happening though, is gender balance in the boardroom. In 2010 women made up only 12.5% of the members of the corporate boards of FTSE 100 companies and 7.8% of FTSE 250 companies.

Home Secretary and Minister for Women and Equality Theresa May said:  http://www.tmay.co.uk/

“Inclusive and diverse boards benefit from fresh perspectives, new ideas and broad experience. A company with a board that reflects the people it serves is better able to understand its customers, and there is growing evidence that companies with more women on their boards outperform their male-dominated rivals.

“Women make up more than half of the population, but account for just 12.5 per cent of FTSE 100 directors. Lord Davies’ report is an important step forward in understanding why this is and what can be done about it, and I shall be considering his findings very carefully.”

The quote can be found at http://bit.ly/ejC3b2

This is not a problem for the UK alone. Across the world, the average percentage of women on boards is 8.9%, though this includes some countries with a significantly lower percentages than ours.

The report goes on to ask why. Through consultation, the team drafting the report obtained some very depressing information about why women with corporate experience were frequently overlooked for board positions. This is a summary of the main reasons:

  • differences in the way that men and women are mentored and sponsored, giving men the edge over their female peers.
  • gender behavioural traits, whereby women show tendencies to undervalue their own skills, achievements and experiences.
  • relatively low number of successful female role models can often compound stereotypes and reinforce perceived difficulties facing women seeking to rise up the corporate ladder.
  • lack of transparency around selection criteria and the way in which executive search firms operate, were together considered to make up a significant barrier.
  • the predominantly male cultural environment and absences of similar female networks.
  • Impact of work-life balance particularly around maternity leave and carer commitments.

It is the final reason that we at EmployEase have seen in action. From our experience a significant number of senior women returning to the workplace after having a child are faced with a situation that ends in their job being terminated. Commonly, while away on maternity leave, their role has been carved up with the best bits being given to someone else (not always a man) or their role has become ‘redundant’ even though it is clear that the role is still being done.

Despite having had legislation that makes this type of behaviour unlawful for decades, it does still go on. Many senior managers still assume that the early years of motherhood are not compatible with top jobs. Frequently, employers will prefer to pay the woman off under a generous compromise agreement rather than complying with their duty to let the woman return to work. The terms of the compromise agreement inevitably includes confidentiality provisions and non bad mouthing clauses, ensuring that the woman does not speak about what has happened to her, except in very general and agreed terms.

Similarly, whilst legislation forces employers to consider requests for flexible working from parents, a request can often result in the glass ceiling remaining firmly above the woman’s head. One of the very common complaints we hear is that a woman has been permitted to work flexibly, only to be frustrated in their career progress.

With the intention of addressing the disparity between the numbers of men and women on boards, the report has made a number of recommendations for FTSE companies. Lord Davies stepped away from recommending quotas for the boardroom. However, it does give a description of how the quota system in Norway has worked.

According to the report, Norway has achieved one of the most significant increases in the representation of women on boards. 44.2% of directors today are women, having risen from just 6.8% in 2002 when 470 out of the 611 relevant companies had no female board members. Whilst the statistics sound impressive, the reality is bleaker for women. It appears that in order to achieve these results, Norwegian companies simply increased the size of boards and created non-executive director appointments. Women still only make up 2% of CEOs and only 10% of executive committee members.

The report and its recommendations can be read at your leisure. However, the main thrust of the recommendations is to make companies publish their statistics and policies. So, encouraging change by embarrassment. It also suggests that such statistics should be relevant when bidding for public projects.

What is clear is that the UK has a long way to go before gender balance in the boardroom becomes the norm.

Are you hitting the glass ceiling or have you successfully made an impact in the boardroom?

You are welcome to share your experiences or tell us how your employer encourages and supports women in senior management roles.

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