NCRW | News from the Network

How to build diversity on boards
Published: May 18 2009 19:41

If there is ever a time for women to make a decisive breakthrough in corporate boardrooms, it is surely now. Many boards, especially in financial services, are in flux after the testosterone-fuelled excesses that led to financial disaster. There is a desperate need to rebuild trust, more easily achieved if boards better reflect customers and the public.

Yet history suggests change will be painfully slow. In the UK, only 11.7 per cent of FTSE 100 directors are female - up by barely five percentage points over 10 years, according to Cranfield University School of Management. As Helen Alexander, president-nominee of the CBI employers' group, pointed out in an FT interview, that is a loss of real talent. The message applies equally to other forms of diversity, including race and social background. We have seen too many examples of the blinkered "groupthink" to which boards drawn from a narrow social range are prone.

Many chairmen see the problem. The FTSE 100 Cross-Company Mentoring Programme, in which chairmen mentor senior women in other companies, is a useful effort to redress the imbalance. But it is time for more radical action. The Financial Reporting Council's review of the combined code on corporate governance, the guidelines for listed companies, offers an opportunity.

While there may be little appetite for a statutory quota for the proportion of women on boards, as applies in Norway, there is a strong case for a voluntary, time-limited quota. A declaration that at least 30 per cent of board members should be female, applied for the next 10 years, would attest to serious intent. Using the "comply or explain" principle, companies with a lower proportion would have to explain if they proposed to fill a vacancy with a man. Chairmen of companies with all-male boards - a fifth of the FTSE 100 - should explain in the annual report why they think this is acceptable.

Directorships should be advertised, to avoid the accusation that chairmen and headhunters fish from too narrow a pool. All-female shortlists can be useful. Companies must devote particular attention to supporting talented people lower down the ladder. Too many women drop out by their late 30s when they meet career hurdles and family pressures at the same time.

It is true that, in financial services, the current pressure is for non-executive directors to have more specialist expertise, which could narrow the range further. But, since millions of women buy these companies' products, having a wider diversity of viewpoints seems like simple good sense.