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Balancing Gender Representation Across The Board

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Summary

There are too few women running companies, so how can we get more in the boardroom?

2 min read

Equality takes time – and it may not even be a persistent trend. While there has been much public discussion in the past few years about women being represented in the boardroom and senior positions, momentum might have stalled.

According to a May 2017 Professional Boards Forum BoardWatch report, women comprise 26.9% of directors on FTSE 100 companies, a figure that seems to have plateaued in the past 18 months.

This finding chimes with the biennial survey by headhunter Egon Zehnder¹. The analysis shows that the number of women being hired for UK boards slipped from 32.1% in 2014 to 29% in 2016 – a sluggish trend also evident in other developed nations. While western Europe may be holding its own with boards being composed of 35.4% women, the US has faltered with women comprising just 20% of boards, up a mere 1% since 2012.

However, when the UK government commissioned a report by Lord Davies to look into the number of women on boards it did achieve early success. In 2015 the FTSE 100 surpassed Lord Davies’s target of having 25% of women on boards. Yet the BoardWatch report indicates that this impetus may be waning at the top of the tree: the number of women bosses of FTSE 250 companies fell from 13 to 10 between 2015 and 2017.

53%

Higher return on equity for companies with higher percentage of female board members

27%

Female Directors of FTSE 100 companies in 2016

42%

Higher for return on sales for companies with higher percentage of female board members

“Women comprise 26.9% of directors on FTSE 100 companies, a figure that seems to have plateaued in the past 18 months”

So what’s the issue with women in boardrooms?

Intuitively, it’s easy to suspect that having women on boards can potentially even out certain working biases of their male counterparts. Some findings seem to reinforce this assumption. The research organisation Catalyst found that on average companies with the highest percentages of women board directors outperformed those with the least by 53% on return on equity and by 42% for return on sales.² Yet correlation is not necessarily causation.

Elin Hurvenes, the founder of Professional Boards Forum, believes the stasis may be down to timing. “Sometimes there are just not that many appointments,” she says. “Board tenures are typically three to four years and if there are no special circumstances a member is quite likely to serve again.”

But the gender representation issue isn’t confined to the boardroom. A Stanford research paper³ on gender diversity in 2016 suggests that the presumed impasse on boardroom growth and senior positions for women may be down to a behavioural bias – a shortcut that helps us to make decisions easier. The analysis (aided by Brian Main from the University of Edinburgh) found that companies tend to replace women with women and men with men. Therefore, as it is already more likely that there are more men acting in the senior echelons of businesses, this trend could be self-sustaining.

“There is a not a one-size-fits-all approach to enabling diversity – companies and managers have to be bold. ”
Peter Flavel, CEO, Coutts

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What can be done about balancing the boards?

The Stanford research reaches a simple – albeit quite obvious – conclusion: “simply increasing the number of women candidates improves the chances that a woman will be selected to a board seat, regardless of who’s being replaced.” In order for this to happen it is important to foster environments where more women come through the ranks and progress to senior positions and the executive suite.

These environments cannot be confined to the waiting room for the company board – they have to span the whole company and empower women at every level. Employee networks, like the Coutts Women’s Network, are powerful for companies to visibly evidence their willingness to address the issue.

But there is an argument to say that addressing the symptoms is not enough, sometimes you need to tackle the root cause. The pivotal point is for companies to ask whether they have a problem with gender representation and establish why this is the case - not just at board level but at an individual employee level.

Peter Flavel, Coutts CEO encourages a culture of healthy challenge, “There is a not a one-size-fits-all approach to enabling diversity – companies and managers have to be bold. Ask your female employees where they want to get to and what’s stopping them from getting there. Be prepared for a frank discussion but empower this honest debate”.

It is this sort of openness that will empower organic mobility of female employees to seek senior positions and career progression. Developing this pipeline is what could make all the difference.

 

¹Egon Zehnder survey… Global Board Diversity Analysis 2016
² Catalyst more women survey
³ Stanford research

Key Takeaways

Efforts to bring more diversity to the UK’s boardrooms suffered a setback last year when the number of women appointed to board positions fell. This is despite research suggesting that companies with the highest number of female directors tended to perform better than others. 

Coutts Women's Network

The Coutts Women's network seeks to enable an inclusive work place that attracts, develops and retains the best talent. Through a series of events and development opportunities, we support our members and their careers.