Women on Boards – do they matter?
On the FTSE 100 only 15.6% of non-executive directors (NEDs) are women, a figure that has effectively not shifted over the last five years. Davies, whilst stopping short of suggesting quotas for board appointments, does recommend potentially far reaching solutions to alter the balance and get far more women and the talent and experience they will bring on to boards.
- significantly greater transparency in board appointments
- FTSE 350 chairs to set targets for changing the balance of board composition
- board members to be drawn from a wider range of backgrounds.
Backed up by proposed changes to the Corporate Governance Code, the onus will very much be on board chairs to deliver.
What does this mean for new look Whitehall boards?
Arguably, not a lot. Currently 44% of NEDs, including Lead NEDs, on Whitehall boards are women.
The government could therefore claim with some justification that it has put its money where its mouth is. Having commissioned Mervyn Davies to look at how to take forward the pledge in the coalition agreement to promote gender equality on the boards of listed companies, it acted promptly to ensure that the composition of Whitehall boards was appropriately diverse.
The challenge however comes in implementation. The government has set great store by the shake up it believes the new boards will bring to Whitehall and to how government departments operate and are accountable. Much is riding therefore on the boards’ performance. They will be watched and scrutinised.
What the Davies report has also done is to make them a litmus test for the performance of more diverse boards. Response in many corporate boardrooms to his recommendations is likely to be less than enthusiastic but boards will probably toe the line not least because what he is recommending represents only incremental change.
If, however, Whitehall boards do not deliver the sea change that is expected of them, murmurings might soon start about how diversity which is effectively imposed is never the answer.
Time will tell
What is interesting is that Davies concludes that women take their NED roles more seriously, improve the quality of decisions by asking the awkward questions and in turn improve performance and better governance. This is borne out from the research we carried out for our forthcoming report on Whitehall boards in that effective NEDs demonstrate the qualities of ‘innovative/creative thinking’, ‘candidness and frankness’, ‘skilled engagement, ‘constructive challenge’ and ‘emotional intelligence’.
If Whitehall has got the diversity mix right on its new boards (including the significant increase of women as permanent secretaries) and these turn out to be the qualities which push up performance, only time will tell.
- Read Lord Davies' report 'Women on Boards' (PDF, 1.92MB)
- Read about the Institute's work on Better Boards
- The IfG Blog: Will ‘new style’ departmental boards kill or cure?