Tag Archives: NED

Companies will be forced to have at least 40% female board members under European Commission plans

See my earlier posts on this at Getting Women on Board

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Companies will be forced to ensure that at least 40 per cent of their board members are women under European Commission-backed plans to help women into top jobs.

The rules demand that companies give non-executive directorships to women, where there is no male candidate who is better qualified, until they reach a target of four in ten. More radical plans were softened by the commission, which rejected imposing a penalty for firms who fail to reach the quota. 

Companies will be forced to ensure at least four of ten board members are women under EC-backed plans

Companies will be forced to ensure at least four of ten board members are women under EC-backed plans. However, the draft law does envisage possible fines for companies that ignore the selection rules.

European Union justice commissioner Viviane Reding, who launched the proposal, said: ‘The Parliament has made the first cracks in the glass ceiling that continues to bar female talent from the top jobs.’

 The news rules do not help women aiming for…

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High performing NHS boards

A recent study reported in the HSJ suggests that the best performing boards have a number of things in common.

  • They have had CEOs in post for more than 4 years
  • They have more women on the boards
  • Their non-executive directors (NEDs) contribute more
  • They are probably a specialist or tertiary trust

The study by Manchester Business School looked at published data including board reports and focussed on three factors to identify high-performing organisations.

These were: customer experience, business performance, and employee satisfaction.

They identified organisations which scored in the top 20% in the last two or three years and from those selected the ones which were high performing on at least two of these factors.

NB Only 3 organisations scored high on all three and interestingly none of the Acute Trusts scored high on employee satisfaction.      

 It makes sense that stable leadershipin organisations, particularly in turbulent times, helps them plan strategically and develop a positive organisational culture. Research by Hay shows that leadership style contributes significantly to an organisation’s climate or culture. And Hackman’s research on teams shows that generally speaking (R&D excepted) stable teams perform better as well.

 

Having more women on boards has been shown to have a positive impact of performance and profit and recent research suggests that women have a constructive influence, probably through their emotional intelligence and social skills, on raising the collective IQ of a team.    

There are obvious problems in this kind of research, as the authors note, but the findings feel intuitively right.

Women now getting on board

FTSE companies have apparently recruited more women onto their boards than ever before since the publication of Lord Davies’s report. 23 this year so far compared with 18 in the whole of 2010.

He wanted companies to double their female contingent within 4 years and they have made a good start with 30% of all appointments being women.

Also the number of blue chip companies without a female board member has dropped from 21 in December to 14. Percentage wise however this is not a big change – from 12.5% in December to 13.9% of all FTSE 100 seats and still only about 9% of FTSE 250 seats.

The UK government is unlikely to impose mandatory quotas unlike Norway which has required companies to have a 40% quota. (See “Getting Women on Board“)

According to a report in The Guardian (02/07/11) this has been a mixed blessing for Norway’s so-called “golden skirts”. It has increased the number of non-executive directors (NEDs) but not the number of female managers. And the situation there seems similar to UK where a handful of women have a handful of NED roles.

And now Helen Morrissey, 45 year-old mother of nine with a house husband, has founded the 30% club aimed at ensuring that all boards have at least 1/3 female members by 2015.

She reportedly manages £50 billion of investments and said; ” The idea that women can have a family and friends and hold down a difficult, high-octane job when both partners work full-time ….. is not impossible but it’s a bit unrealistic”.

Updated 5 September 2011: The government’s deadline for voluntary compliance with a 25% target for female board membership has passed uneventfully. Only 8 companies in the FTSE100 have announced their plans to meet this target over the next few years. These are HSBC, Anglo-American, Centrica,GSK, National Grid, Vodaphone, M&S, and Land Securities, according to research by Pinsent Masons reported in The Times. This figure is disputed by Cranfield School of Management researchers who say there are actually 15 companies which have signed up.

There are 12 companies which already have 25% female board directors – so that makes possibly 27. The number of women on boards has increased to 14% since Lord Davies’s report with 23% of new appointments since then being women. There are still 14 companies with no women at all on their boards.

Women in senior management in big companies according to Deloitte:

  • Norway = 35.6&
  • USA = 15.7%
  • Canada = 12.9%
  • France = 12.7%
  • Australia = 11.2%
  • Spain = 9.2%
  • Netherlands = 9.2%
  • Hong Kong = 8.6%
  • Germany = 8.2%
  • China = 8.1%
  • Belgium = 7.7%
  • Czech Republic = 7.6%
  • Singapore = 6.4%
  • Italy = 6.2%

Getting women on board

Back in July I posted a blog about Alpha Males and made reference to the paucity of women in board-level jobs and the Norwegian attempts to overcome it by passing legislation in 2008 requiring all listed companies to have 40% of directors women.

Apparently it wasn’t very popular as businesses felt that inexperienced women would push out experienced men and women though they would be seen as token appointments. The fuss has died down now, according to a report by Carly Chynoweth in the Sunday Times (24/10/10); “Where quotas can succeed”.

She cited the Norwegian Institute for Social Research in Oslo where researchers found that 70% of male directors and more than 50% of women directors said that the quota has either made no difference or improved things (I’d love to know the split between women and men on how they rated the level of improvement). Only 11% of men and 1% of women felt that working on a board had become more difficult.

Female directors now hold a higher than average number of positions because of the demand for experienced women and the effect has been to replace younger, less-experienced, men – thus keeping standards high. Back in 2004 a survey of companies on the Oslo stock exchange found that 75% of board members were male, aged between 56 and 69 years of age, had attended Bergen Business School and all lived within 5 miles of west Oslo.

Diversity wasn’t an issue: women were just ignored when recruiting directors. Quotas aren’t new to Norway, their Labour party has had a 40% women quota for elections for 30 years, and proponents argue that having a quota didn’t give women an unfair advantage but just stopped them being overlooked. Before the quota was imposed females made up 29% of directors and this rose to 44% in 2008 before dropping to 38% in 2010.

Here in the UK the proportion of female directors has risen from 6.4% in 2001 to 13.6% in 2010, comparable to similar increases across Europe: from 9% to 12%. Spain, which also introduced a quota in 2008 with a target of 40% by 2015, has increased its percentage of female directors by 67% bringing the proportion up to 11%, France is considering a quota of 40% by 2016 after increasing the proportion by 57% to 12%, and Holland is aiming for 30% by 2016.

In the UK headhunters think that chairmen are looking for more balanced boards with an increase in demand for female non-executive directors (NEDs). Whilst Norway doesn’t appear to be recruiting women from other Nordic countries it seems European businesses are keen to recruit British women, who now seem in short supply as many already have NED portfolios.

In fact having a flexible NED portfolio might be more attractive to women than pursuing a career as a CEO considering there are only 5 in FTSE 100 companies. And in financial companies at least, male directors still earn more than female ones. According to the Chartered Management Institute the average salary for men is £150, 283 and £126,704 for women.

According to a more recent story by James Ashton in the Sunday Times (7/11/10) the government is now considering introducing a quota for women on boards of directors. Research at Cranfield shows that the  proportion of women on boards has doubled in the past 8 years to 12% but the financial crisis put the progress on hold as companies turned to more experienced men to help them out of recession. A 40% quota has been mooted which would mean that FTSE 100 companies would need to triple their female board members from the existing 100.

As mentioned above some countries already have quota systems but the government is hoping that companies will recruit more women without a quota being enforced. The Prime Minister pledged to bring in legislation to ensure companies recruited more women, suggesting that half the candidates on long lists for directors should be women and that vacancies should be more widely advertised.

There are mixed views about quotas with some believing they don’t work at all. The government’s review, led by former trade minister Lord Davies, is open for consultation until the end of November with a report due in the New Year.

Updated 31 December 2010: It now seems unlikely that the government will impose quotas for women directors. According to The Times today, Lord Davies has said in his commentary; “Quotas have proved successful in some countries but I am not convinced they are the right method to encourage progress.Female executives need to be recognised for the talent and skills they possess.”

He is considering other initiatives to tap the pool of potential women directors and has “thought about the merits of setting up an academy for female executives.” So positive action rules OK? More sensibly he argues for more transparency in the recruitment process and a best practice code for headhunters.

Employers’ organisations have differing opinions on the matter. The CBI believes that companies should have targets for the appointment of women and have to explain why they miss them but the IoD dismisses the idea as an “undesirable quick-fix solution” and one that politicises the issue of women in the boardroom and promotes gender diversity above other inequality issues.

See also:

“Pay Differentials”

“Why are we worrying about gender pay differences”

“What sex is your job”

Updated 10 February 2011: Those bureaucrats in Brussels are now getting involved. They are drawing up  proposals to have at least 40% women on all publicly registered companies. Initially the scheme will be voluntary but if companies fail to sign up it could become compulsory by the year-end.

The proposal is being championed by the Justice commissioner Vivien Reding and would require companies to employ 30% of women at board level by 2015 and 40% by 2020. She says if companies fail to achieve appropriate self-regulation by the end of 2011 “we must initiate an EU legal instrument”

The Luxemberger’s threats should not be taken lightly as she was the commissioner who forced mobile phone companies to lower their prices for international calls.

Lord Davies in the UK is still finalising his report on this topic and is expected to come up with something similar but unlikely to make such immediate demands. The Sunday Times thinks he will call for a doubling of female board members to 25% by 2015 otherwise companies would be subject to a quota.

Updated 23 February 2011: More speculation about Lord Davies’s report due out this week. It seems likely that he will expect headhunters and shareholders to sign up to a new code of practice in an attempt to install more women in the boardroom. He is also expected to recommend that 20% of directors should be women by 2013 rising to 25% by 2015. The current figure in FTSE 100 companies is 12.5% and only 7.5% in the FTSE 250 list.

Only 11% of people responding to Davies’s report thought quotas were a good ideas and companies vary: Centrica already has 25% females whereas there are 18 FTSE 100 companies, including Associated British Foods which owns Primark, which have none. Some companies are unrepentant saying things like: “we have a duty to get the best candidates – which to date had been male” and “we need people with time to devote to the job”

The worry is that pushing women onto boards before they are ready will dilute the quality although there is some research which suggests companies can be more profitable with women on the board.

Do women want to be judged on a quota basis as token females or get there on their own merit?