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Only the government can ensure women get on to boards

Only the government can ensure women get on to boards

KEVIN Roberts got it wrong. The chairman of advertising agency Saatchi & Saatchi was forced to resign last week after he suggested, among other provocative statements, that the debate on gender parity was ‘all over’.

If only that were true. The number of women on the boards of the UK’s largest public companies just inched over the 25pc mark last year, driven by a voluntary target imposed by Lord Davies of Abersoch and the government-backed review he headed. Since then, however, things appear to be going backwards.

Sir Philip Hampton, chairman of the healthcare company GSK, who took over from Lord Davies as chair of the Women on Boards review in February, released research last month showing that female representation on the boards of the FTSE 100 had remained stagnant at 26pc.

Worse, fewer than a quarter of board appointments between September and March — the best measure of future composition — were women, the lowest since 2011, when the 25pc target for the FTSE 100 was set. This is despite the target being updated in 2015 to having women make up a third of boards of the UK’s 350 largest listed companies by 2020.

The UK is not the only country where progress is stagnating or going into reverse. Research published in June by campaign group Catalyst found that fewer than a fifth of board seats at the US’s largest public companies were held by women in 2015, a percentage unchanged from the year before. Even in Norway, which adopted mandatory 40-60 female-male boardroom quotas in 2006, progress at the top has stalled.

But the UK provides a salutary example of what happens when you take the pressure off.

Increasing the number of women at the top is difficult, and the reasons are not just varied but well-rehearsed. The nature of professional aspirations, childcare challenges and unconscious bias all play a role. Working with people who look and sound like us is easier than working with a diverse team, and the fact that diversity is uncomfortable means that, however well-intentioned they are in this regard, company directors often have to be either coaxed or threatened into improving it.

But diversity delivers results. Research from McKinsey shows that companies in the top quartile for gender or racial and ethnic diversity are more likely to see superior performance measured by average financial returns. Numerous studies have found that more diverse leadership teams improve problem solving and decision making.

If any example of the dangers of a narrow leadership group was needed, the recent Chilcot report into the decision-making process leading up to the invasion of Iraq in 2003 provides it. Tony Blair, the report suggests, liked to restrict discussion to members of his inner circle, and as prime minister was not challenged enough by them; the larger cabinet was given a ‘much more limited’ chance to have a substantive debate. These factors contributed to the catastrophic errors that ensued.

‘Sofa’ governance by a group of people who feel comfortable together does not deliver the best decisions, and works no better at companies than it did at Number 10. But the tendency to revert to such a group is a strong one and requires powerful counteraction.

The stagnation in the UK’s progress towards improving diversity at the top is down to one factor: the failure of the Conservative government to give Sir Philip and his review the support and backing that Vince Cable, the former business secretary under the coalition government, so firmly gave his predecessor.

The UK’s big corporates met the original target of 25pc because they much preferred a voluntary goal to a legislative imposition — and the threat of the latter was constantly present.

That implicit threat has disappeared. Announcing the latest numbers this month, Sir Philip said that the ‘lull in activity’ since his appointment in February had been due to the distraction of the UK’s EU referendum.

Such an excuse seems risible. It is also, worryingly, still present, given that Brexit will take up a great deal of government head space for the foreseeable future, not to mention the fact that the UK will fall out of any EU initiatives to improve diversity. But the truth is that, unlike its predecessor, the Conservative government has simply not put its weight behind the push.

The lessons from the past are that voluntary targets work if they are backed by the implicit threat of legislation. Sir Philip needs the new people in power (many of them women) to give him vocal — and credible — backing.

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Published in Dawn, Business & Finance weekly, August 8th, 2016

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