Unbalanced boardrooms

Posted on 3 Dec 2010 by The Manufacturer

The number of women in Britain’s boardrooms has failed to increase for the third year running according to Cranfield research.

The 2010 Female FTSE report from Cranfield School of Management has revealed another year of plateau for the numbers of women in the most senior positions in British business. The authors of the report have suggested that changes to standard appointments processes might encourage greater equality and diversity in Britain’s boardrooms, particularly in the nation’s top 100 companies. Out of 1,076 on the FTSE 100 boards there are just 135 female-held directorships in the UK, a number which represents just 12.5% of the positions available.

Despite the stagnation in the numbers of female British directorships the report does show some positive results. Foremost among these is the fact that the number of companies with no female representation at all at board level has decreased from 25 in 2009 to 21 this year. Leading the way with executive female representation is Burberry Group where the CEO, the chief financial officer and one of the non-executive directors are all women. This makes a total of three out of eight board members being female (37.5%).

Lead researcher on the Cranfield report, Dr Ruth Sealy, told TM that the report’s breakdown of board level demographics by sector showed that there was no evidence to suggest that companies in traditionally male dominated sectors – including manufacturing – had a precedent for having less female representation on their boards than sectors where women make up a greater proportion of the workforce. This is both a positive message to ambitious women functioning in the sector and an indication to existing manufacturing boards that there is no sectoral excuse for ignoring lack of executive diversity.

Largely speaking the research shows that female executive roles tend to be in finance and there is also a healthy representation of CEOs among board level women. BAE Systems however bucks this trend for female roles resting predominantly support and business functions with its chief operations officer role currently being held by a woman. Sealy was enthusiastic about the way BAE are championing diversity of all kinds in their most senior echelons: “If you want a role model for leading diversity I would have no problem saying ‘look at Dick Olver [chairman at BAE], look at BAE. Women working in manufacturing should not allow themselves to be convinced that, just because there are more men working in the sector, they are less likely to reach senior positions.

Speaking more generally of all sectors Sealy continued: “There is still too much female talent not making it to the boardroom. Eighty-two of the FTSE 100 companies have women on their executive committees. These women are a rich resource pool for future board directorships. This pipeline of women continues to grow each year – there are now 2,551 women on the corporate boards and executive committees of all FTSE listed companies.”

Equalities Minister Lynne Featherstone backed up Sealy’s concerns saying: “While I’m pleased to see the number of female-free boardrooms continuing to fall, it’s worrying that women – who make up more than 50 per cent of the population – still account for just one-eighth of FTSE 100 directors. Making boards more diverse is not about political correctness – it’s about making sure companies draw senior staff from the widest possible pool of talent, which is good for business, good for staff and good for customers.”

The Cranfiled research also turns the spotlight on the FTSE 250 companies, where an unacceptable 52.4% (131) of companies have no women on their boards. Just 7.8% of FTSE 250 board directors are women.

In the past some have made excuses for the UKs failure to promote a higher proportion of women to board positions by suggesting that the smaller board sizes of Britain’s large representation of mid-sized companies constrained their ability to push diversity into the board. Professor Susan Vinnicombe OBE, co-author of the report says, however, that the Cranfield research explodes this as a myth: “In our view chairmen overplay how the small size of boards can constrain gender diversity.

“Our report clearly demonstrates there is no correlation between board size and diversity. The top two companies in the Female FTSE 100 list are Burberry and Alliance Trust who have only eight and nine on their respective boards, yet manage to have three women directors each. Further afield, nearly 30% of new appointments to Australian boards this year, of which the average size is seven, have gone to women.”

This year’s Ctranfield research has worked with survey participants to suggest ways in which gender imbalance at board level might be addressed. As a result of the interviews undertaken during the research and also accumulated research from the past 12 years, Cranfield’s authors suggest the following actions:

•Strengthen the new principle on diversity in selection to ‘Comply or Explain’. Any Chairman with less than 20% women on their boards and executive committees needs to explain why this is the case in their annual reports. This should apply to all FTSE 350 listed companies. The 20% should be reviewed in three years time with a view to lifting it to 30%.

•Advertise all NED positions in the private sector.

•Require search consultants to produce balanced candidate lists.

•Continue to make the appointments process as rigorous and objective as possible through use of skills audits.

•Use peer-to-peer pressure from FTSE 100 Chairmen to encourage FTSE 250 Chairmen to seek female candidates for their boards.