Full disclosure: UK Government steps in to get more women into the boardroom
By Elizabeth Harrin (London)
UK companies may be required to report on their efforts to get more women into the boardroom. The Government has asked the Financial Reporting Council, which is currently consulting on its UK Corporate Governance Code, to consider adding in a requirement to get companies to disclose what they are doing to increase the number of women in senior management roles. It’s not exactly clear what would then happen to the data disclosed, but it’s likely to be used to highlight firms that aren’t making enough of an effort.
“Britain needs more women in the boardroom,” says Harriet Harman, Minister for Women and Equalities. “Too many British boardrooms are still no-go areas for women. Women are important consumers and employees. We’ll never get a proper meritocracy or truly family-friendly workplaces from male dominated boards.”
Harman’s proposals have been backed by the Prime Minister, Gordon Brown. “We all recognise the value of strong role models for women in all walks of life – and there are many in politics, the arts, public services, sport and the third sector,” he said. “But there are too few in Britain’s boardrooms. When more than half of graduates are women, it is completely unacceptable that some of our top 100 public companies have not a single woman on their boards – and that none at all have a majority of women on their boards. A new principle in the governance code on diversity would build on the provisions in the equality bill, which allow employers to take positive action when recruiting to balance their workforce.”
The controversial Equality Bill is making its way through the legislative process, but has been criticised for promoting discrimination – albeit positive discrimination. The bill allows employers to choose to take positive action to appoint a person from an under-represented group, provided candidates are as qualified to do the job as each other.
“If we do not see a dramatic change in the composition of company boards in the future, we will need to consider taking more serious action to ensure companies recruit from the diverse pool of exceptional talent we have in the UK,” the Prime Minister added.
Dramatic Changes
More serious action could be the introduction of quotas, which have been considered in Norway and France, amongst other places. Quotas would not be embraced with open arms by the UK financial community, but it might not come to that if companies can sort themselves out without heavy-handed legislation. The Financial Reporting Council’s code of conduct could well be the first step for UK businesses.
And of course, the clause about disclosing what you’re doing to promote more women to the boardroom might not make it into the revised code of conduct, although given that the ‘request’ has practically come from Number 10 they would have to have a good reason not to include it in the code. So let’s assume it will become part of the new documentation once consultation is finished. We know that governments can and do consider quotas, but should they be supporting what amounts to a name and shame policy?
“ION supports requiring companies to disclose what they are doing to increase diversity on their boards – meaning diversity of gender, race, and ethnicity,” says Charlotte Laurent-Ottomane, President of capital markets consulting firm Nvestcom and incoming President of the InterOrganization Network, a US non-profit group with the aim of increasing representation of women in the executive suite. Laurent-Ottomane points out that the US Securities and Exchange Commission has recently amended its rules to require certain disclosures about the manner in which diversity is taken into consideration by boards and nominating committees in selecting candidates for the board.
“We were disappointed that the SEC declined to define diversity and will be watching to see whether companies pay more attention to diversity of skill and experience and avoid the gender and race issues and whether companies actually develop policies and procedures to increase the gender diversity of their boards,” she adds.
The FRC won’t have that problem: the tweak to their code of conduct specifically mentions reporting on the efforts to get women into the top jobs. While we should be pleased that there’s a focus on increasing the participation of women, it does seem like a very narrow definition of diversity coming from the Government Equalities Office. The GEO sets policy on gender equality, sexual orientation, and for integrating work on race – which is a much wider remit than just getting women into the boardroom. You have to ask whether there will be further tweaks recommended in due course to reflect the contribution that other under-represented groups could be making to running our businesses.
However, the Government appears very active in supporting women, and that’s something we should be grateful for. Later this year we’ll get the outcome from the Equality and Human Rights Commission, which is producing some more recommendations on how to tackle sex discrimination in the finance sector, following an inquiry last year that found huge pay discrepancies between men and women in the financial sector.
Are Recommendations Enough?
This year, the Government has kicked off a new Women’s Employment Strategy – it remains be seen how much this will actually work towards a fair and family-friendly job market. There are also moves afoot to get more women into the senior civil service.
All of which is well and good, but what governments recommend (without legislating) and what businesses do are two different things. “Government is playing its part, but firms need to play their part too,” says Harman.
Baroness Prosser, Chair of the Women and Work Commission agrees. “As the economic recovery gathers strength, it is vital that the Government continues to work closely with businesses to capitalise on the skills and experience of women,” she says. “The economic benefits of more women participating in the labour market should not be overlooked at this crucial time.”
