‘Light the blue touch paper and stand back’
As we reflect on the decade since the Davis Report on Women on Boards, there is the opportunity to celebrate and commiserate on what has been achieved.
As we see from the recently published Spencer Stuart Board Diversity Index 2021 and the Female FTSE Board Report by Cranfield University, there are many successes to proclaim on the gender progression and minority representation on Boards. However, there are two glaring and highly impactful ‘black holes’ in key crucial positions which mute this celebration. We have got nowhere near solving the inequality of women in the key CEO leadership positions and nowhere near a 40% women leadership of our Boards.
The annual Female FTSE Board Report by Cranfield University shows the progression at the Board level, but throws into stark relief the lack of progress on gender equality in the C-Suite, with only 8% female CEOs across the FTSE 350 and the female Chairman leadership of our Boards at 11% in the FTSE 100 and 14% in the FTSE 250. Additionally, female participation in executive leadership has flatlined at 13.7% in the FTSE 100 and 11.2% in the FTSE 250.
As I look back to 2011 as a fervent advocate of targeted development of women on Boards, as opposed to mandatory quotas, a significant distinction in my mind was the necessary progression of a robust cadre of women in the executive leadership pipeline as well as new role models on the Board, who would carry the mantel of gender equality onto Boards through organisations and into future generations. This was in direct contrast to the quota system which ‘just’ appointed ‘inexperienced’ women onto Boards. Looking back on gender equality across the whole workspace, it is difficult and disheartening to see minor difference between the impact of voluntary and compulsory systems. Gender equality in the leadership pipeline and specifically on the Executive Committee, are very poor under both approaches.
Having been part of the considerable effort and energy expended to achieve the 40% representation of women on Boards, I cannot help feeling that that effort would have been better placed going for a compulsory quota on the Board. Than advocating and pushing for the 40% representation of women in the pivotal CEO leadership position and the Board Chairmanship role as the driving force of real radical change (CEO’s c.8% in both the FTSE 100 and 250; Chairman 11% to 14% across the FTSE 100 and 250). It is beyond me why women who represent broadly a 30-40% participants in the workforce, should not be reflected in the similar proportions in the top leadership of those organisations.
My reflection was also stirred by a recent blog article by Assistant Professor Shirley Lu at the Harvard Business School (Quota or Disclosure? Evidence from corporate board gender diversity policies: Principles of Responsible Investment web) which delves into the difference between the two systems of Quota’s and Disclosure. She draws a contextual distinction on the supply dynamics of females appointed to Boards, where a lack of demand constrain shows little difference between the levels of female appointment to Boards, versus the situation where there is a high supply side constraint to the women available to sit on Boards, which benefits from the quota system in achieving equality of Boards. While recognising the quota system can lead to the appointment of less experienced female directors in high supply deficient industries, often typical of foreign nationality and PhD level education, there is also a recognition that quotas increase the future supply of female directors under a quota system as they gain experience and knowledge.
The classic rationalisation for the lack to the progression of women in CEO, Executive Committee and Senior Leadership roles is the ‘supply deficiency’ mentioned above. The research done by Assistant Professor Shirley Lu indicates that we could be waiting a long time for the ‘supply side’ environment to change voluntarily. While we also have the insight from the Cranfield Report of the many capable female leaders who are around, ready and able to fulfil the most senior roles.
Is it time for quotas to be mandated on the levels of female CEO Leadership, Chairmanship of our companies and membership of the Executive Committee? The howls of protest can be heard rebounding across the ether. But why not? This would shake up and accelerate the creative development for our women leaders, with a real material penalty for not achieving the quotas. I will even concede to a 3-year implementation plan, perfectly adequate time to structure meaningful development. We could recast the diversity landscape, and in 5 years’ time be looking at a minimum of 20% of Females in CEO leadership positions, 40% Female Board Chairman and 30-40% female membership of the Executive Committee. The alternative is to let nature take its course, and be sitting here in 10 years’ time having a similar conversation.
Have we misdirected our creativity and not spent the time and energy on innovative solutions to the real barriers to women’s entry into the leadership cadre. Why have we accepted this as an intractable problem which might slowly get better over time? If the recent pandemic has taught us anything it is that radical change is possible where everyone is aligned and pushing in the same direction.
Would we have been better ten years ago just imposing an immediate 40% female quota on Boards and getting the focus immediately on the progression of women into leadership positions backed by a powerful Board mandate. It is no coincidence that the two critical driving dimensions of equality in the workplace are seen as the CEO and Chairmanship of our companies, (CEO’s 8% female across the FTSE 350; and the female Chairs 11% and 14% across the FTSE 100 and 250).
While there is a sense of pride in what has been achieved so far, there is a steadily increasing sense of frustration, at the slow progress on these critical pivotal indicators of successful gender diversity. Below are just a few quotes from the Cranfield Report.
“The lack of female representation in executive roles is particularly striking, especially when the presence of women in senior positions, critically the role of CEO and Chairperson, was noted to be a strong and influential driver.”
“The Chair can play an important role in ensuring oversight of the succession plans at board level. This task must be taken more seriously if we are to address the continual lack of progress of women into executive roles. Eight women CEOs across FTSE 100 companies in 2021 simply doesn’t add up!”
“I think the lack of progress in executive roles is actually the far more important metric and benchmark than board roles.”
“With Covid impacting women’s careers disproportionately the need to address this is now more urgent than ever. We can’t build back better without building back more inclusively. Inclusion works for everyone, as this report reminds us, and we know more about what works to deliver it. So, let’s get more women leaders into top roles. Promote men and women proportionately. Sustainable business success depends on it!”
“The CEO appoints their own team so in the absence of robust and diverse succession planning this can make their appointments to the executive committee biased and risky.”
“With the Employee Surveys, everyone pats themselves on the back, because Diversity and Inclusion is one of our highest scores. […] Well, that’s because 70% of our population are white men who are included in every walk of life, so of course they feel included.”
Consequently, my reflections have left me feeling a bit ‘hollow’ about this Board gender victory, have we ‘bought’ into the ‘trap’ of slow and careful? It seriously feels that we are not facing up to the issues of women flowing rapidly through to the senior leadership of our companies. We are relying on traditional and slow solutions to solve an unconventional premise, where we need to employ spiralling creativity and innovation. This should be a revolution of thought and imagination to break the mould and learn new ways of thinking and acting.
The critical positions of influence to change this blatant lack of equality are the CEO and the Chairman, overwhelmingly dominated by male participants. The CEO with their ever-diminishing tenure on the role, down to 5 years from 8.3 years over the last decade, would have to be extraordinarily incentivised to look beyond their more immediate performance. However, there is little excuse for the Chairman to ignore this inequality, with their focus on the stewardship of the business. Our exemplar companies are showing the way where the Board takes a decisive and active role in steering the future CEO cadre.
Another 10 years with no guarantees of a solution? I have a shrewd idea that the vast majority of the currently male CEOs facing this decision in any other sphere of their business would make a very quick decision.
