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Women on Corporate Boards
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Women on Corporate Boards
A significant milestone for gender equality in the UK was reached when it was announced in February 2023 that women now hold 40 per cent of FTSE 350 board seats, up from just 9.5 per cent in 2011. This was the key finding of a report published by the FTSE Women Leaders Review (WLR), a government-supported but voluntary business campaign that advocates for more women in the boardroom and in senior management roles.
For the past 20 years there has been a greater focus on women in business and on corporate boards, starting with the Davies Review in 2011. This independent review recommended more diverse and inclusive boards, including gender targets.
At the time, 152 of the 350 largest company boards did not have a single woman. By 2020, women were represented on every large company board in the UK. And after a little more than a decade, women now hold two out of five publicly listed board seats – or 1,203 women - three years earlier than expected.
This is a laudable achievement. But women are still greatly underrepresented in leadership roles, particularly in senior management or the C-suite. While progress has been made, considerably more work needs to be done before women achieve gender parity.
Voluntary Targets vs Mandatory Quotas
Progress in the UK has been achieved through voluntary targets, government prodding and public “naming and shaming” via disclosures in annual financial reports, rather than quotas. There has been a debate for years over whether mandatory directives, such as those found in Norway and France, are necessary to increase the number of women. According to the WLR the UK is now second only to France in female boardroom representation internationally, and just ahead of Norway.
Norway was the first country in the world to introduce gender quotas for all publicly traded companies in 2003. By 2006 it required boards to be 40 per cent female or be subject to sanctions, including possible dissolution. Other countries in Europe, such as Spain, Belgium, Italy and the Netherlands, set similar quotas but with less severe sanctions. A recent European Union directive requires all member states to have at least 40 per cent women non-executive directors on large corporate boards by 2026.
The UK has demonstrated that voluntary measures can be effective, particularly with regard to directors in the largest companies. But the proportion of women on executive committees and direct reports to the executive committee is around one-third, even at the largest 100 companies.
For CEO and chair roles, the numbers are sobering. Women make up less than one in five chair roles, with only 55 women chairs and 21 female chief executives across the entire FTSE 350. Moreover, women in senior management tend to hold Human Resources Director or Company Secretary roles, rather than a Finance Director role, which is regarded as a stepping stone to becoming a CEO.
Benefits of Greater Inclusion on Boards and in C-Suites
Socially conscious investors who care about environmental, social and governance (ESG) factors are increasingly pushing for diversity and inclusion in the companies they fund. Customers are demanding this too.
Some research suggests that companies with greater gender diversity on boards and in senior management are more likely to be profitable, among other benefits. More diverse leadership helps
organisations make better business decisions since they can draw on a wider range of opinions and viewpoints. Businesses become more open to change and develop less appetite for extreme risk. Companies which embrace diversity and inclusion also perform better because they attract the best talent. Besides the moral argument, including more women makes good business sense.
Next Steps
The WLR group is recommending that every FTSE 350 company have at least one woman appointed to the top corporate roles of chair, CEO, finance director and senior independent director by the end of 2025.
The Financial Conduct Authority (FCA), which regulates listed companies, has also called for greater diversity. Last year it introduced new gender and ethnic targets for listed companies, along with an obligation to comply or to explain why they have not done so. The FCA now requires at least 40 per cent of the board be composed of women; at least one top corporate role be held by a woman; and at least one board member be from an ethnic minority background. These are important steps in the path to achieving diversity and should help reduce bias in the selection process for senior roles.
But achieving true equality will require going further. A change in corporate culture is needed so companies support policies that provide equal opportunities in the workplace. The pandemic paved the way for greater acceptance of flexible working, which had been requested by many working women for years - and which businesses managed to implement with remarkable speed when the bottom line required it. These more progressive workplace practices, along with recent government measures on flexible working, benefit all employees and create a stronger workforce. Businesses also need to do more to support women returning from maternity leave or career breaks. These changes can help ensure that there are more women in the pipeline for senior executive roles and that women do not fall off the corporate ladder -- thereby also helping to close the gender pay gap.
Companies should also make sure that women’s voices - and a broad range of voices - are actually heard, and not just present, in the boardroom. Women on boards are expected to be direct but to also display warmth and empathy, according to research published in January 2023 in the Harvard Business Review. Therefore, even when women have broken barriers to reach the boardroom, they still have to navigate gender stereotypes and expectations. Greater support of women from chairs and CEOs modelling inclusive practices, along with acceptance of different leadership styles, will help guarantee that women’s perspectives are considered – and that women are found at all levels of decision-making.
Attaining gender equality requires a long-term, sustained commitment. Tamara Box, Managing Partner, EME, at Reed Smith LLP and a founding member of the steering committee of the 30% Club – which campaigns for gender balance on boards and in C-suites globally - has been championing this issue for years. (see interview in this edition of LW). As she sums up: “Representation matters. And it requires constant effort until it becomes the norm.”
Joanne Skolnick
