Gender divide

The Davos World Economic Forum made headlines in January when it announced it would require its strategic partner members, some of the largest corporations in the world, to ensure that a minimum of one in their cohort of five be a woman. The imposition of such a ‘quota’ is a reflection of the dearth of women at the head of major corporations.

Internationally, women are still not making it in great enough numbers to the boardroom. In the US in 2010, representation of women and minorities on corporate boards actually fell. Women held just 15.7pc of Fortune 500 board seats. This is despite the fact that census figures released in April showed that women outnumbered men for the first time when it came to holding advanced degrees. Among adults aged 25 and older, 10.6 million in the US who earned a master’s degree or higher were women, compared to 10.5 million men.

In Europe, the situation appears to be improving, according to research from the European Professional Women’s Network (EPWN). Its EuropeanPWN Board Women Monitor 2010 found that the proportion of women on the boards of the top European companies has grown to 12pc in 2010 from 8pc in 2004. However, the bad news is it found that the proportion of women on Irish boards of directors had fallen from 10.1pc in 2008 to just 8.9pc in 2010.

McKinsey has been publishing its annual Women Matter report since 2007, and its latest report, Women Matter 2010, found that “women are still underrepresented on boards of corporations, although improvements have been seen in this area in some countries” and “gender diversity within executive committees remains very low”.

Yet considerable evidence shows there is a direct correlation between the number of women in corporate leadership and improved business performance.

Indeed, the McKinsey research showed that across all industry sectors, companies with the most women on their boards of directors consistently outperformed those with none – by 41pc when measured by return on equity and by 56pc when measured by operating results.

What is also interesting is that there seems to be an awareness among business leaders of this link. A further McKinsey survey conducted in September 2010 of some 1,500 business leaders worldwide across all sectors, from middle managers to CEOs, found that the majority of leaders, both men and women, now recognise gender diversity as a performance driver.

Quota or no quota

Throughout Europe there are moves afoot to change this, although there are widely differing views on the introduction of actual binding quotas. In France there are plans to introduce a 20pc quota by 2012 for the largest 2,500 companies.

In February European Commissioner Viviane Reding met with business leaders to encourage them to sign a pledge to increase the number of women on their boards. The ‘Women on the Board Pledge’ asks for a voluntary commitment to increase women’s presence on corporate boards to 30pc by 2015 and 40pc by 2020. It is open for signature by all publicly listed companies in Europe.

Reding, who is in charge of gender equality in the EU, advised companies to become creative “so that regulators do not have to become creative”.

German Chancellor Angela Merkel has offered companies one last chance to improve or she will bring in a quota of 30pc – she has described the current situation as a ‘scandal’. The 30 companies listed on Frankfurt’s Dax index of leading shares met with German ministers in April and promised to set targets to promote more female managers. In Germany’s 200 largest corporations the figure currently sits at just 3.2pc.

Norway has proven that quotas do work. Some 40pc of its board members are women, after the country passed a law in 2008 requiring publicly listed companies to have boards comprising at least 40pc women.

The Davies report

Our nearest neighbour, the UK, was seriously considering a quota, but in February a government-commissioned review by Lord Mervyn Davies stopped short of recommending the introduction of quotas, but rather recommended that all UK companies should begin efforts to boost female participation on boards. Davies said FTSE 100 companies should aim to have a minimum of 25pc of women on their boards by 2015, adding that radical changes were needed in UK boardrooms.

Although he did not recommend enforceable quotas, Davies said companies should have to explain themselves if certain goals were not reached in the area. He said all companies should announce their targets for female representation on boards and how they will achieve these. If they are not reached, the company should have to explain why, he said.

Currently women make up just 12.5pc of FTSE 100 boards, while 18 FTSE 100 companies have no women on their boards, and about half of the companies in the FTSE 250 have no female directors, according to figures from Cranfield School of Management.

“Radical change is needed in the mindset of the business community if we are to implement the scale of change that is needed,” said Davies. “This is not about aiming for a specific figure and is not just about promoting equal opportunities but it is about improving business performance.”

The report urged the Financial Reporting Council to amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity. Davies said he believed a voluntary target would be successful but that, if these were not achieved, enforceable quotas might have to be considered for the country’s top 350 listed companies.

The Irish view

Here in Ireland, the Institute of Directors (IoD) recently carried out research among its members with Behaviour & Attitudes on this very topic, in order to gauge attitudes to formal gender quotas. Two-thirds (66pc) of directors surveyed were not in favour of gender quotas to increase the number of women on boards. Some 22pc would be in favour as a temporary requirement, with just 12pc of directors in favour as a permanent requirement.

When the results were analysed by gender, almost three in four (72pc) males were not in favour of quota systems to increase the number of women on boards, while six in 10 (60pc) female directors would be in favour of quotas. The majority of the latter, however, said they would only be in favour as a temporary requirement.

“The gender issue should only form part of a wider discussion on board diversity and the introduction of formal quota systems is not necessarily the right way to achieve that diversity,” said Maura Quinn, chief executive, IoD in Ireland. “Yes we need more female directors, but we should be looking at gender in the broader context of board diversity, which encompasses the skills mix, age profile and nationality of board members.

“Diversity on boards is vital to ensure sufficient balance,” she added. “A mix of skills and expertise, nationalities and gender brings a range of perspectives to the decision-making process and avoids the groupthink mentality that has been common on many boards in recent years.”

Whether it is via quotas or not, it’s up to our leaders, male and female, to ensure that women are receiving the professional development and mentoring to rise up the organisational ladder.

Ginka Toegel is professor of organisational behaviour and leadership at IMD. “Despite the disappointing statistics, I believe that there are many good reasons to be positive,” she says. “I strongly believe that the next five to 10 years will see a dramatic change for the better.

“Women managers can contribute to this by understanding that there are certain expectations related to organisational leadership, and developing their skills accordingly. Men can both help and benefit by understanding the specific problems that women business leaders face.”