How Women are Changing Boardrooms

In the last few years there has been a concerted effort made across the world to increase the number of women in the boardroom. Although equality is a desirable aim in itself it is the positive change, especially to business performance, which women can bring that is now the driving force behind this cultural shift. Boards with more women significantly outperform their rivals, delivering 42% higher return in sales, 66% higher return on invested capital and 53% higher return on equity. It makes very good business sense to have a gender balanced board.

In 2011 the UK government commissioned Lord Davies to investigate the issues surrounding the slow progress being made in the UK. Although there had been a slight increase in the number of women board members from 9.4% in 2004 to 12.5% in 2010 Lord Davies argued that at that rate it would take 70 years to reach parity despite the fact that women form 46% of the economically active workforce, make about 70% of the household purchasing decisions and hold about half the UK’s wealth.

Lord Davies called for the FTSE 100 companies to have at least 25% women board members by 2015. By placing the issue centre stage and requiring companies to report annually on their boardroom diversity the number of women has increased dramatically, almost doubling in four years to 23.5% in March 2015. Four years ago there were 21 FTSE 100 boards with no women; now there are none. Forty one companies in the FTSE 100 have met the 25% target and 65 in the FTSE 250. Two companies, Diageo and Intercontinental Hotels Group, have 45% women board members.

Globally, there has been a cultural shift and recognition that women bring a number of benefits to the board by helping to improve the company’s performance, enhancing the board’s independence and by managing and controlling risk. By bringing a different perspective to the decision-making process, often asking more challenging and searching questions, decisions are less likely to be just nodded through and group-think is avoided. Research by Leeds University Business School has shown that by having at least one woman on the board can reduce a company’s chances of going bust by 20%, this is increased if there are more.

There have been a number of different approaches taken to the challenge of promoting diversity. Norway was the first country to set a quota in 2005. Others have followed suit. The UK has taken a proactive approach but resisted setting a quota in an effort to avoid tokenism. So far the approach appears to be working; overall the UK is now ranked fifth globally, behind Norway, Finland, Sweden and France. In comparison the USA is ranked only tenth and is making slow progress.

However constant vigilance is required to avoid tokenistic appointments. The women that do reach the board need to stay and the greater gender balanced the board the greater benefits with 30% seen as the point of critical mass. This should be our minimum aim to create strong companies with good corporate governance, accessing the widest possible talent pool and with the breadth of understanding to respond positively to the markets.


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