Women on boards: the drive for cultural change
Decades of equal opportunities policies have not made a significant impact on the number of female directors in UK business. This article looks at current practice, and the barriers that may prevent gender-diverse boards from being the norm.
Does the organisation you work for have a female director? If it is a top ranking organisation then the chances are that it does but in the UK the actual number per board is low. In the last three years the number of women directors on the board of FTSE100 companies has plateaued at around 12.5 per cent, (Vinnicombe et al 2010). Small business does better: research for The Independent on Sunday shows 25 per cent of directors of SMEs are women. But even this is low, compared to quotas of up to 40 per cent being introduced in France, Spain and Norway.
UK Government has made a commitment to promote gender equality by asking Lord Davies to develop a strategy to increase the number of women on the board of listed companies. The Davies Review is due to report later in February 2011. But will it make any difference to board composition when 40 years of equal opportunity policies haven't?
This article looks at what management research can tell us about the benefits to organisations of having women directors, the barriers they face, and what can be done by government, business and individuals to overcome the boardroom gender divide.
What do women bring to the boardroom?
A review of 40 years' management research into this issue by Siri Terjesen, Ruth Sealy and Val Singh (2009) looks at the advantages of having women on the board along with the reasons why women fail to make it to board level. They found clear evidence that women directors benefit organisational performance by bringing a different experience of work and wider life to decision-making. Even so, they face perceptions of tokenism, and loneliness: Erkut, Kramer & Konrad, (2008 as cited in Terjesen) found there needs to be two or more women on the board for any lasting impact to be felt. Terjesen's review indicates that boards with three or more women are significantly different from all-male boards, and are more likely to:
- Explicitly identify criteria for measuring strategy
- Monitor implementation of strategy
- Have higher levels of accountability
- Have more effective communication among the board and stakeholders
- Be more active in promoting non-financial performance measures such as customer or employee satisfaction
- Consider measures of innovation and corporate social responsibility
- Have better corporate governance.
Terjesen's review also highlights the results of several studies showing that a gender-diverse board brings business benefits including increased ROI and total return to shareholders. Interestingly, there is even an increase in share price for a couple of days after a female board member is announced. Earlier research (Bilmoria 2000 and Brown et al 2002, cited in Terjesen) drew attention to the fact that powerful institutional investors seek gender diversity on the boards of companies they invest in, and may see a diverse board as a sign that the company is forward-thinking.
So if there are so many benefits to having women on corporate boards, why are there so few? And why does it still make the news every time a woman makes it to the board of a FTSE 100 company?
No room at the table: what gets in the way of women reaching the board?
Research shows that CEOs are more likely to lead boards composed of people who are similar to themselves in gender, age, background and experience. Since most CEOs are male, this leads to a cycle of men selecting more men. Unfortunately, this can lead to group think whereby the board reinforces each others' thinking, leading to insufficient debate and poor decisions (Daily & Dalton, 1995).
There is evidence (e.g. Biernat & Kobrynowicz, 1997, cited in Terjesen) that women need to work harder than men to get onto the board: they are more likely than their male counterparts to have MBAs and international experience, and significantly more likely to have experience as a board director of a smaller firm.
Social perception of the stereotypical female role also has an impact. Terjesen's review draws on lots of studies to show that general perceptions of how a woman should behave and what role is expected of her can influence not only the board but her own belief in her ability to, for instance, combine motherhood and a career.
In a recent interview by Helen Rumbelow in The Times, Sylvia Ann Hewlett, a campaigner for family friendly workplaces and author of Baby hunger and The war against parents, explains how maternity leave can have a detrimental impact on the career and earning potential of the mother, with the greatest effect being seen in countries where paid maternity leave is generous. Here in the UK, where it is possible to take up to a year for maternity leave, 39 weeks of which are state-funded, an annual survey of 10,000 employers found that only 26 per cent intend to hire mothers this year, down from 38 per cent last year. In Sweden, where mothers can take up to 16 months' maternity leave, a paper from the Research Institute of Industrial Economics in Stockholm blames these generous policies for the fact that fewer Swedish women were top managers than in Britain, America or Australia, concluding: 'The more generous you are with maternity leave, the fewer women you are likely to see at the top.'
Burgess and Tharenou (2002 as cited by Terjesen) agree: in Australia, where maternity leave is up to 12 months, only 44 per cent of women directors have children. This compares with 70 per cent in USA and Canada where maternity leave is 12 weeks and 35 weeks respectively. Canadian parental leave can be split between both parents so the effect of parenthood may not be greater for one sex than another.
So what can be done?
Addressing gender balance on boards is not going to be easy. Some current ideas include:
- Introducing legislation and/or quotas
- Creating more female networking opportunities
- More female mentors
- Encouraging headhunters to put more females on candidate lists.
Legislation and/or quotas
Introducing any kind of legislation is emotive: there are women who argue that they want to get to the board on merit, not through quotas or other legal means, while others argue that even a small quota would be a step in the right direction. However, Norway's experience suggests a quota is key. Not only did the legislation create the pressure needed for fundamental change-seven years after it became law, the number of women on boards has reached 40 per cent; but it triggered a public debate about gender equality in the wider community, and is now widely accepted in Norwegian politics and society (Storvik & Teigen, 2009). The authors claim that without legislation, there would have been no change.
Norway's experience has been so positive that other European countries are contemplating adopting a quota. The Spanish Government has made a commitment to achieving at least 40 per cent of each gender by 2015, Iceland expects implementation by 2013, and France is due to vote on the introduction of quotas later in 2011.
Women's networking and mentoring
These need no legislation and numerous 'women in business' networks already exist, which are great for women to gain encouragement from other women. But if these networking events aren't attracting directors, they might not help get more women on boards. What's important is that women have opportunities to network with directors, whether they're male or female. If male CEOs are to be persuaded of a woman's ability, then mixed networking may work better (provided it's in a female-friendly environment).
That said, it's important for women to have strong female role models. Therefore more female mentors seems logical and reasonable. But, with a shortage of female directors, how do you get enough female mentors for it to work?
The impact of Lord Davies' report has yet to be seen, but research into board composition shows the advance of women onto corporate boards is painfully slow, despite nearly 40 years of equal opportunities policies. What appears to be clear from Norway's experience is that we need wide cultural change for there to be general acceptance of women at the top of organisations. It needs to be core to the fabric of society, and supported by individual choices, for example when men see sharing maternity leave equally with their partner as normal, and more men do it, we'll know attitudes really have changed. Let's hope that Lord Davies uses good management research to inform the debate and drive change.
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