A ‘rigged system’- Dialling up the Diversity
I have been advocating for some time the necessity for accelerated action to appoint more woman as Chairman in the FTSE 350 as a driver of change at the Board level (Article: Women Covid Leadership – The Head, The Heart and The Egos, The Gender Bonus Beyond further articles on our website). My view is that greater gender diversity in the Chairman role would have a leverage effect and directly hasten and advance Executive pipeline diversity at senior leadership levels, with the percentage of women in executive roles flatlining in both the FTSE 100 and 250 in 2021. Also it would actively facilitate tackling pay gap differentials at the Board and executive levels and provide a more effective response to the growing board challenges on ESG issues, especially climate change. While advances have been made on the gender balance on Boards, the Chairman stands out as an unacknowledged ‘blind spot’ in advancing our Boards into a modern era.
The recent publication of ‘The Female FTSE Board Report 2021’ from Cranfield University, with a section on ‘Women in Senior Non-Executive Roles’, has provided some welcome further illumination on the issues of male hegemony in the Chairman role. It is not, however, a comfortable read, as it clearly identifies the ‘brakes’ on providing greater diversity at the Chairman level, while ‘blowing away’ some of the myths around the available female talent pool for the Chairman role.
In particular, the Report consulted with several Senior Chairmen on the necessary criteria for being considered for the role, namely:
experience of working in at least three different sectors.
a senior executive role, if possible, at Board level.
Chair of a Board Committee, preferably Audit or Remuneration on a FTSE 100 company.
Chair experience in another sector, for example, a University Council.
This gels with my experience of discussions with existing Chairman, as does the reflection in the Report, of factors originally identified in the Hampton-Alexander Review in 2018 as problematic in the selection process of a new Chairman;
inexperienced SIDs leading to rushed processes and a keenness to play safe.
Briefs too narrowly written, and
Investor concerns, where women are not perceived to have City experience or be well known.
This gives a depressing sense of ‘déjà vu’ both back to the earlier days of the push for Women on Boards and a greater throwback to the early days of sex discrimination legislation (now encapsulated in The Equality Act), where we had endless debates and discussion around what constituted indirect discrimination. Three of the four Chairman role selection criteria’s are to my mind on very shaky ground regarding the required ‘objective justification’ for mitigating indirect discrimination in a role.
‘Working in at least three different sectors’, more men are likely to have done this, so disadvantaging women.
‘Worked at a senior executive role, if possible, Board level’, inherently indirectly discriminatory against women, with the added kick that the most common Board executive role of the CEO and FD positions are overwhelmingly dominated by men.
‘Chair of a Board Committee, preferably Audit or Remuneration on a FTSE 100’, while women do well on the FTSE 100 Remuneration Committees at c.50%, around only 20% of FTSE 100 Audit Committee Chairman are women (Data taken from BoardEx, analysis conducted by Sam Allen Associates).
‘Chair experience in another sector’, probably the only criteria where women are not directly or indirectly disadvantaged, with a very open non-discriminatory Public Sector appointments process creating talented women Chairman.
It is time to address this issue with more direct action and more creative and expanded research into capable women Chairman as described and demonstrated in ‘The Female FTSE Board Report 2021’. While the FTSE 100 often shows leadership on Board equality issues, they are way behind the curve on equality of Chairman, with the rest of the FTSE in a similar dire position. As global issues become more and more important to investor groups and impact on the sustainability of our Companies, it is important to isolate the restrictive, old fashioned and discriminatory views, expressed by a narrow group of investors, “that Companies with women on the Board give poorer returns” which is blatantly untrue, and thus should be regarded as an unsubstantiated viewpoint.
There needs to be a much more assertive stance taken by the Nominations Committee, to clearly address the Succession of the Chairman in an open and non-discriminatory process, interestingly most Nominations Committees are Chaired by the Chairman (who by definition is male). It is also worthy of note that the chairman cannot take part in discussions re their own succession. The role therefore has to be adopted by another NED not experienced in chairing the Nominations Committee.
Now is the time for accelerated action on the glaring direct and indirect discrimination preventing them from being appointed as Chairmen of our FTSE companies. It is important to make Boards more relevant to a modern age where the Environment, Social and Governance issues are, or should be, at the forefront of the Boards collective mind. This speaks directly to creating a sustainable future for a business as a practical imperative, as markets change rapidly in response to a fast-moving social media consumer driven landscape. The speed of market changes is accelerating with Companies needing to be agile in their response to changing consumer desires and international standards.
Recent times with the pandemic have shown Boards, Executive Leadership, Employees and Consumers that rapid change and adaptation is possible, breaking down old myths and barriers to progression. This requires a declaration from each Board Nominations Committee of their commitment to a planned, open and more systematic selection process for the Chairman role which goes beyond the traditional restrictive criteria and restrictive thinking, to include a wealth of talented female Chairman candidates who are out there awaiting the call.
