Across the globe there have been calls for greater gender diversity in the boardroom. In the UK, the 2016 Government sponsored Hampton-Alexander Review recommended that the Boards of FTSE 350 companies must have at least 33% female representation by December 2020.
While progress has been made towards achieving this target, the Department for Business, Energy and Industrial Strategy announced in 2020 that more than 4 in 10 FTSE 350 companies have still failed to reach this goal.
Research shows that boards with a diverse membership generally perform more effectively, possessing a broader range of skills and approaches to tackling problems. Increasing gender diversity can enhance the board’s capacity to navigate complex questions and challenges.
Some countries, particularly in Europe, have passed legislation to force companies to comply with a gender diversity quota. I believe the UK should pass such legislation too. It could help the us reach the stated goal of being carbon net zero by 2050.
In equal measure
My research interests have evolved over time. I explored gender diversity and earnings management for listed European companies. This led to my involvement in a later study on how gender diversity can make a board more effective and impactful, especially in improving corporate social performance and achieving environmental goals.This study also explored the progress being made towards achieving gender parity on corporate boards.
A number of countries are working to promote equal representation on boards. Some like Norway, France, Italy, Belgium and Spain have passed quota legislation, forcing companies to have gender diversity on their boards.
The UK is somewhat behind; here it is still a recommendation for businesses and is not legally binding. While large FTSE-listed companies are often under considerable scrutiny from investors and stakeholders, many can provide legitimate-sounding reasons why they have struggled to achieve such gender diversity. With no current legal or enforcerable mechanism to hold them to account, this state of affairs is unlikely to change any time soon.
Boards have to balance the needs of the stakeholders and investors. Typically, investors are focused on the bottom line whereas other stakeholders are interested in the broader non economic returns. Boards need to manage this tension. A lot of research to date has focused on board diversity from the investor’s perspective. I am interested in exploring board gender diversity from the perspective of stakeholders in general.
Equal to the task
Some argue that there are cases where women have been appointed to boards in a tokenistic gesture to ‘tick a box’. This is unnecessary; it ignores the fact that that many women are highly educated, experienced and skilled with impressive financial literacy or scientific knowledge.
Despite women performing well in the education system, and sometimes outperforming their male peers, they are not being invited to take up senior opportunities in large businesses.
According to the Gender Equality Global Report and Ranking of 2021, women globally have achieved only 25% representation on corporate boards. Fifteen per cent of companies have a gender balanced board and only 7% have gender balanced executive teams. This needs to be addressed.
Exploring board gender diversity from a stakeholders’ perspective is revelatory. Having more gender parity at the highest levels can benefit both a government’s national agenda, as well as communities and employees. Our research found that having at least one female member on the board improved an organisation’s CSR performance and progress towards achieving stated environmental and social performance goals.
We know women have different perspectives to men, especially in relation to environmental protection. Social scientists and psychologists point to research showing that women are less likely to flout financial or ethical regulations or to be involved in disreputable practices. They are generally more empathetic, caring and risk averse. They are more likely to be engaged with social and environmental issues and have a heightened awareness of the legacy being left to future generations and the problems they will have to tackle. This is an important factor in advancing the CSR agenda. Women are much stronger advocates for ending issues like child labour, in part influenced by their roles as caregivers in most societies.
This could benefit the UK as it strives to reach the goal of becoming carbon net zero by 2050. The UK is a big emitter of carbon dioxide; it is currently unclear how the government will achieve the ambitious targets it has set. Boards can play a role here.
Investment in technology and practices to reduce carbon emissions will impact the bottom line, eating into profits over the long term. What can be forgotten in cost-focused executive groups are the societal and reputational benefits from reducing our environmental footprint. These can offer a competitive advantage, making it easier to secure loans and reduce the cost of such borrowing. These additional benefits are often overlooked when discussion focuses mainly on the financials.
Many minds make light work
When women are shut out of boardrooms, we lose their role as change agents in society. Through their lived experience, many women bring different perspectives to tackling business problems. They have frequently had to balance multiple responsibilities and pursue careers while juggling caring responsibilities in the home. They often bring more compassion and warmth to hard business decisions, balancing the human side of business with the economic and financial drivers. Moreover, women contributing to top level decision making can be cataysts for bringing about societal change.
In many Hollywood films, males in large businesses and corporates are portrayed as dominant, single-minded and focused on career success at (almost) any price. This sends a signal that this is how senior leaders and executives have to behave in order to succeed a business environment and that showing compassion is a weaknesses. I suspect it is also replicated in the actual power structures around and even outside Hollywood too.
Bringing home the bacon
Some believe that lockdowns in the pandemic have solidified traditional gender roles. Others have argued that with the borders between the private (home) and public (work) spaces have blurred these roles have been more fluid. It is tempting to speculate that post-pandemic, as people call on leadership to be more empathetic, there is more likelihood that women will be better represented at senior levels in organisations and on boards.
While some families have easily accommodated homeworking and home schooling during the pandemic, in others it has caused friction and increased tension. I expect many people are keen to return to the workplace! Women are generally more used to managing multiple distractions, juggling competing priorities and responsibilities.
In many societies, husbands and fathers are encouraged to see their role as providing for the family, shouldering the burden of being the breadwinner. Family is important, but carrying this financial responsibility makes forging a successful career very important too. Achieving career success can reduce anxiety and lessen the financial burden for husbands and fathers.
In the eyes of the law
UK legislation on corporate governance needs to be stronger. The time has come for the Government to set a robust target that companies can work towards to improve gender diversity in the boardroom. They should be held to account to do this.
Progress has been made, but we need to speed this up, especially as large companies often have the most comprehensive data and the most resources to tackle these problems. When you have a diverse board, you have people contributing different ideas. A lot of women have the capability and experience to contribute at board level. Extending the opportunity to them is a way to nurture talent. Although women and girls make up half the world’s population, gender representation in the boardroom today does not reflect this truth.
