More Women Recommended for Board Positions, But It’s Not All Good News

By Elizabeth Harrin (London)

Don’t get us wrong. We love the fact that there are more women being recommended for non-executive roles at British companies, according to new research. But does this small uplift really show a sea-change in attitudes to women in the top jobs?

The research, published by MM&K, an executive remuneration consultancy, involved more than 300 directors. HR Magazine reports that in 2010, only 43% of survey respondents said they would recommend a woman as a non-executive director. This year the figure is up at 50%. Good news for women wanting roles as non-execs; there seems to be more willingness to put forward women’s names when considering making new board appointments. But 50%? Seriously? The other half of the people asked don’t know any women who would make good non-executive directors?

The trouble is that there just aren’t that many great female candidates around. There are only 242 women with board seats in the FTSE350 companies. That’s 242 seats out of 2,742 available seats. Part of the problem is that women are under-represented in senior management in general. “Of the 14 companies in the FTSE100 that were founded within the last fifty years, every one of them was started by a man, or group of men,” says David O’Hara, Founder of Blackthorn Focus. He cites examples like Autonomy, Cairn Energy and Investec. O’Hara believes that non-executive roles are generally filled by people who are in a founding position or the role of finance director – and these are not the positions typically held by women.

The Non-Exec Conversation

“I believe there is more conversation about women in non-executive roles,” says Susan Butler, author of the new book Women Count: A Guide to Changing the World. “There has been a mind-set change, at least in Europe, that there needs to be more balance at the top of organisations. CEOs need to groom women for senior leadership positions and ultimately board positions. Directors need to understand the importance of diversity everywhere the organisation, and hold the CEO accountable. And the pools for new director positions need to have women in them, and shareholders need to let their voices heard, too. It is time to change.”

The role of the non-exec is a challenging one. The Board members are there to govern the organisation. The company’s executive reports to the Board, and the Board holds that person accountable for the company’s performance. If the company isn’t performing well, the Board has to assess the financial performance, the legal issues, the external public appearance and the organisational direction. The Board represents the shareholders’ interests, so if something, like gender equality in the company, needs to change, the shareholders hold the directors accountable. In turn, the directors hold the CEO accountable for making the changes happen.

Non-executive directors typically spend 24 days a year on the job, and this has increased since last year. The time of a non-executive director involves dealing with risk and regulatory requirements, amongst other things. If that doesn’t sound like too much work, the scale of the challenge is perhaps better reflected in the remuneration. PwC’s research shows that the average salary for a non-executive director in the FTSE 100 is £57,000 a year. “While the non-executive role is more rewarding than ever, there is a risk that the extra time demands will make the role less viable for individuals who have full-time positions elsewhere,” says Philip Wright, partner at PwC who chairs the firm’s FTSE 350 non executive director programme. “It would be disappointing if a company could not attract a chief executive as a non-executive, given the perspective and experience that such a person can bring to the job.”

Greater demands in the role itself also mean that individuals can’t take on as many non-executive director positions as they once might have done. This is further reason for Boards to extend their reach and hire from the pool of available, experienced women.

Selecting Women for Boards

Cranfield School of Management’s Female FTSE Report shows that the old boy’s network is no longer the primary source of recommendations for non-executive directorships, so perhaps it shouldn’t matter so much that people can’t name good female candidates. The modern approach is a competency and skills based assessment of all the candidates for non-exec roles, so women take their chances alongside male candidates.

“They [Boards] are selecting women for inclusion and to have a more diverse group with what that brings,” says leadership expert Dr Gabriela Cora. She believes that diversity brings a fresh view, innovation and a richer environment.

And she’s not alone. Butler agrees: “Research has proven that companies with gender equality outperform others in their sector when measuring return on equity. Also, over 50 percent of the college graduates are women, over 50 percent of the workforce are women and over 75 percent of the purchasing power is impacted by women, it is just good business to have more parity of genders on the leadership teams.”

No UK Board Quotas

These are arguments that we have heard before. Other European countries have opted for quotas to try to force companies to address the balance. Lord Davies’ report, Women on Boards (February 2011), presents the findings from a government review, and stops short of recommending quotas. “Why should companies accept diversity targets being forced on them?” says O’Hara. “I am not aware of such targets governing promotion to the Cabinet, or the Bank of England’s Monetary Policy Committee.”

“I like the idea proposed in Europe of having a 30 percent club, organizations who have 30 percent non-executive directors rather than a quota system,” says Butler. “In order to do this however, current boards need to accept more diversity on their boards and CEOs need to implement a strategy to have the senior leadership team be at least 30 percent.”

The number of women in non-exec roles is going up. The number of women being recommended for non-exec roles is going up. But the numbers still aren’t that good, and we are still hung up on numbers rather than on the value that diversity brings. “Bringing equality in organisations moves us from counting women to women count,” says Butler. “If we change the world for women, we change the world for everyone.”