13 Nov 2015
Gender diversity on boards has improved, but the struggle for businesswomen to gain access is ongoing
Women hoping to become board members in big organisations still face an uphill struggle, despite research showing that British boardrooms are becoming more gender diverse.
A government-backed report from Lord Mervyn Davies reveals that women hold 26.1 per cent of the board positions in FTSE 100 companies. The figure exceeds the target, set in 2011, of having 25 per cent women on UK boards by 2015. Back then, only 135 of 1,076 (12.5 per cent) FTSE 100 directorships were held by women.
While the rise is encouraging for ambitious women, they still face a battle to enter the boardroom and make an impact once they get there.
“Boards are still selected mainly on personal contacts and relationships, a process that can be a barrier for women,” said Tammy Erickson, Adjunct Professor of Organisational Behaviour at London Business School.
“There is a perception that the best board members are people who have been CEOs or very senior managers in other companies, which can also be an obstacle for women because there aren’t that many who have held the top jobs.”
Out with the old
Encouraging existing board members to break with tradition is another big challenge for women in business, according to Erickson.
“One of the interesting things I’ve found is that some of the oldest, most senior women who fought their way up the corporate hierarchy when females were truly unwelcome tend to be even less empathetic and sympathetic about the need to create a more humane workplace than younger men may be.
“Those women may say, ‘I had to fight my way to the top and you have to too’ so they’re the least flexible in some cases.”
Research shows that the case for establishing more gender diverse boards is strong. When studying the impact of all-male boards on companies in the US, UK and India, accountancy firm Grant Thornton found that businesses listed on the S&P 500, CNX 200 or FTSE 350 were missing out on opportunities worth US$655 billion.
The report, carried out in 2014, revealed that companies with at least one female executive board member tended to make better financial decisions and generally outperformed firms with male-only boards.
“There is really good research that shows having gender diversity increases a group’s innovative thinking,” Erickson said. “It helps the company think more broadly, innovatively and creatively. Of course, much depends on who the women are, because if they think exactly the way men do then you’re not benefiting from a different perspective.”
Another benefit is that women tend to listen more than men and are more collaborative. They also reduce the risk of corporate scandals in a digital age where damaging news spreads quickly. In March 2015, research from index provider MSCI found that companies with board diversity greater than regulatory mandates or market norms had fewer instances of governance-related scandals.
The report, which looked at more than 6,500 company boards globally, said there was a clear pattern between having higher than mandated percentages of women on boards and fewer governance-related controversies.
Erickson agrees: “It’s less likely that women will be tied into those tight interpersonal networks with other board members, so they may be more independent and have the confidence to ask frank questions.
“You may have people who look like external directors on paper, but they could be closely tied to the organisation through relationships with the internal directors. If that happens, companies are not getting that real fresh perspective they need. Having more women on the board of directors will lead to tougher questions being asked and result in more ethical behaviour.”
Old habits die hard
Despite the benefits of having female board members, some companies still persist with all-male boards. Erickson believes tradition and habit are reasons why such firms have failed to establish gender diversity in the boardroom.
“Many companies still run under old assumptions of what leaders should be doing, what they look like and how they ought to behave,” she said. “If you survey women, you’ll find they readily identify things in the old industrial model of an organisation that are demotivating and cause them to be less engaged in the company, such as working a 60-hour week with no flexibility.
“Leadership is about creating an environment that encourages people to invest discretionary effort – give their all on tasks where you can’t assess whether they’re doing it to the best of their ability, such as being innovative.”
Creating a more gender diverse board is not only good for women, but men too. “Companies with lots of women in leadership roles are much more likely to create an environment where you have this discretionary effort,” Erickson said.
Mandatory quotas have made it easier for women to enter the boardroom. Norwegian companies must allocate 40 per cent of their board roles to women, while Lord Davies has called for a new target of 33 per cent women board members at FTSE 350 firms by 2020.
Erickson believes boardroom quotas have had a positive impact on organisations. “30% is the magic tipping point for minorities to feel comfortable about speaking up, so getting women above that mark is an important goal for bringing gender diversity to the fore,” she said.
“From that perspective, there is value in quotas. As more women gain board experience, they establish the necessary networks to help other women break through and it becomes a self-improving system.”