In February 2011, the 2011 Davies Report called for substantial change in the boardrooms of the United Kingdom, noting a marked absence of women in boardrooms as non-executives. And while the report did not set mandatory quotas for women on U.K. boards, it suggested that FTSE 100 companies should strive to make their boards at least 25 percent female by 2015, with the expectation that many would achieve a higher figure than that.

While that was not quite achieved at the time of the publication of the 2015 Davies Report last March, the target was, in fact, met by the end of the year. According to Elin Hurvenes, founder and chair of Professional Boards Forum: “In average percentage terms, the Lord Davies target was met towards the end of 2015. However, it is interesting to note that 42 FTSE 100 companies still have less than 25 percent women directors.” Most of this increase has occurred among female non-executive directors. There are still very few women executives. Added Hurvenes: “We might see the end of all-male boards in the FTSE 250 by the end of 2016, something that disappeared from the FTSE 100 two years ago.”

Indeed, since the publication of the Davies report last year, several all-male FTSE 250 boards, such as JD Sports Fashion, Enterprise Inns and Supergroup, have appointed women non-executives. Progress also continues within the FTSE 100. Last March, no companies had equal female and male board representation, but now two companies do: Intercontinental hotels and Unilever.

“It’s important,” says Hurvenes, “that boards and senior management reflect a company’s employee and customer base. Did you know that up until two or three years ago, there were no women on the board of Mothercare? But in their impatience for change, people tend to forget that most non-executive directors are elected for three to four years, and that term is often renewed, so board seats may not become vacant for six to eight years. We cannot ask companies to fire directors to make room for women candidates.”

“In average percentage terms, the Lord Davies target was met towards the end of 2015. However, it is interesting to note that 42 FTSE 100 companies still have less than 25% women directors.”

Elin Hurvenes, Founder & Chair, Professional Boards Forum

Shortly after the 2011 Women on Boards report called for full reporting of gender statistics, the U.K. Corporate Governance Code required companies in 2012 to report on their boardroom diversity policy and disclose the gender split in the workplace from the board down. According to the 2015 report, more than 85 percent of FTSE 100 companies now disclose their boardroom diversity policy and over 58 percent have set measurable objectives. In addition, Narrative Reporting Regulations came into force in October 2013. These regulations have led most companies to include information on gender breakdown at the board and senior management level, as well as across the whole workforce.

While Lord Davies has stepped down from the women on boards review body, its work is continuing. Sir Philip Hampton was appointed in early February this year to lead the review body, and the goal of women on boards has now been raised to 33.3 percent. Sixteen companies already met that target at the time of the 2015 Davies Report, and it is likely that more do so now.

 “I will focus on improving representation in the executive layer of companies, as well as maintaining the momentum on boards,” Hampton said in his first statement as the women on boards review body chairman. “This means looking at the talent pipeline for female executives and emerging non-executive directors to ensure we create opportunities and the right conditions for women to succeed.”

The job of the next review has not been finalised yet, but its overall aims are to continue to champion work to improve representation of women on FTSE 350 boards, as well as to consider options for building the talent pipeline, focusing on improving representation of women in the executive layer of FTSE 350 companies.

 “There is a very small number of female CEOs and CFOs in the FTSE 350,” says Hurvenes. “Only about 5 percent in all. It’s not that there are no women senior managers, or that they all say no when offered senior jobs, but to be offered an internal top job you have to be on the CEO bench and have received the support and preparation needed, including solid P&L experience. Most companies, if they are good, have two or three internal candidates on the bench, but very few have any women, and if you are not on the bench you will not be appointed. Investors will not be happy if a company promotes a female CEO just because she is a woman but lacks the right experience, exposure, and preparation.”

Even before Hampton’s appointment, CBI Director-General Carolyn Fairbairn gave a speech on 28 January in which she called for a target of 25 percent female senior executives. “Today, there are just nine more female executive directors on FTSE 350 boards than in 2010 and the number of female chief executives has barely moved,” she said. “We have talked a lot about glass ceilings over the years, but in my view we now need to talk more about sticky floors. Why are women choosing to leave?”


Below, is a summary of the Peterson Institute study, which found that the presence of more female leaders in top management positions correlated with increased profitability at these companies.
An extraordinary new survey of 21,980 publicly traded companies in 91 countries demonstrates that the presence of more female leaders in top positions of corporate management correlates with increased profitability of these companies, according to a paper published today by the Peterson Institute for International Economics. The 35-page report, Is Gender Diversity Profitable? Evidence from a Global Survey, was written by Marcus Noland, Tyler Moran, and Barbara Kotschwar and supported by a major research grant from EY. This is the latest and most rigorous data analysis of gender diversity and corporate profitability to date.
This groundbreaking study shows that the extent of gender diversity and its relationship to profitability varies robustly by country, sector of the economy, and by policies towards female work opportunities. The research finds no evidence that, by itself, having a female CEO is related to increased profitability, but there is some evidence that having women on a board may help—and robust evidence that women in the C-level (as in CEO, CFO and COO of management) is associated with higher profitability. In 2014 data, the study finds that nearly a third of companies globally have no women in either board or C-suite positions, 60 percent have no female board members, 50 percent have no female top executives, and fewer than 5 percent have a female CEO.
The PIIE report also found strong positive correlations between gender diversity in company size, the size of the company as well as national policies for women's education, family leave, and the absence of discriminatory attitudes toward female executives. The study found that national averages for women's participation on boards range across countries from 4 percent to roughly 40 percent, and that there is greater female representation on board and corporate leadership positions in the financial, healthcare, utility, and telecommunications sectors than in sectors such as basic materials, technology, energy, and industry. This is consistent with the authors' interpretation that what matters most for gender diversity is creating a pipeline of women into corporate management, from elementary education through child-bearing years.
“We have found that some policy initiatives are more promising than others to deliver benefits while promoting gender equality, and that the emphasis should be on increasing diversity in corporate management broadly,” said Adam S. Posen, president of the Peterson Institute for International Economics. “At a minimum, the results from our unique global study, generously supported by EY, strongly suggest the positive impact of gender diversity on firm performance and identify in which sectors and countries the most progress on diversity needs to be made.”
“The impact of having more women in senior leadership on net margin, when a third of companies studies do not, begs the question of what the global economic impact would be if more women rose in the ranks,” said Stephen R. Howe, Jr., EY's US Chairman and Americas Managing Partner. “The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”
Source: Peterson Institute Study

Fairbairn reiterated many of the concerns of last year’s Davies report that too much of the U.K. business world was still geared toward men. “The availability of childcare, flexible working arrangements, and support in caring for elderly parents are part of this,” she said while encouraging the new review body to make such a target part of a new U.K. corporate governance code and that companies should be required either to meet the target or explain why.

 “A target for women in senior management is a good idea, though it will take time,” Hurvenes says. “But companies should be held accountable and must explain regularly what they are doing. That will provide focus and put it higher on board and executive management agendas. It’s good mental hygiene.”

At the time the voluntary target was introduced in the United Kingdom, there was some criticism that no one would follow it and that quotas would be needed. While there was an implicit threat that a quota might be introduced if progress wasn’t seen, it turned out to be unnecessary. In addition, there was significant opposition to quotas in the United Kingdom, and this continues. Helena Morrissey, one of the founders of the 30 percent Club, an organisation that has been campaigning for 30 percent women on boards, said in July last year that “[q]uotas actually undermine the principle of equality and are patronising to women. Even those countries with quotas are still struggling with genuine equality and there’s evidence that shareholder value can be destroyed if quotas are imposed. Directors need to be there on merit … Progress is already being made through self-regulation here in the United Kingdom and we expect this to accelerate. Investors don’t want quotas, boards don’t want quotas, and women don’t want quotas.”

In fact, Viviane Reding, EU Justice commissioner, proposed quotas of 40 percent in 2012 for all EU member states, but legislation has stalled in the Commission. Hurvenes has a more nuanced opinion. “The two countries that have been most successful in increasing gender diversity on boards are Norway and the United Kingdom. One with a quota, one with a voluntary target.” Hurvenes, who works in Scandinavia as well as across Europe and the United Kingdom, says that the reason there was only 6 percent of women on boards in Norway prior to the quota was not the lack of qualified and competent women, it was traditional mindsets and lack of interest and innovation. “Everyone was surprised to find that it was not such an impossible task to meet the quotas and that there were many women who could be an asset to the board. It’s all about power and influence and men on boards were not in a hurry to give that up.”

Asked about the remarkable success of the voluntary initiative in the United Kingdom, Hurvenes—whose Professional Boards Forum was set up in 2003 following Norway’s controversial quota legislation for women on corporate boards and whose alumnae have been appointed to more than 400 non-executive positions in leading companies—says that one of the great drivers of change was the group leading it. “Sir Roger Carr, chairman of BAE Systems, Sir Philip Hampton, currently chairman of GlaxoSmithKline, Sir Win Bischoff, chairman of the Financial Reporting Council, and Sir Peter Bonfield, for example, were all prepared to take a strong lead on the issue and to use their time, network, and energy promoting women on boards, speaking at and participating in numerous both before and after the Davies report came out,” Hurvenes says.

So, there has been success, but why is there such an emphasis on gender diversity?  A recent Peterson Institute study, a meta-survey of 21,980 publicly traded companies in 91 countries, demonstrated that the presence of more female leaders in top management positions correlated with increased profitability at these companies. While the study found no evidence that, by itself, having a female CEO is related to increased profitability, there was some evidence, however, that having women on a board may help, and that having women in the C-suite in general is associated with higher profitability. Once a business case is made for the importance of diversity, it seems, existing management will take action.

Women on boards and women in senior management are only the first pieces of the diversity issue to be addressed. The U.K. government has also brought forward the issue of racial diversity. And Hurvenes added: “The next big thing will be international experience. You just have to look at Unilever’s board, [one of the few with 50:50 male/female mix] to see what a good internationalist board looks like.”