At the current rate of change, it will take over 70 years to achieve gender-balanced boardrooms in the UK. Alana Patterson looks at what is being done to address this.
Concerned about the slow rate of progress in increasing female representation on boards, the UK Government invited Lord Davies of Abersoch to undertake a review of gender equality of the Boards of listed companies. He was asked to make recommendations regarding what government and business could do to increase the proportion of women on corporate boards.
He recommended that UK-listed companies on the FTSE 100 should aim for a minimum of 25% female board representation by 2015. Lord Davies also called on chairmen of FTSE 350 companies to announce their own targets. On October 2011, the Financial Reporting Council published revisions to the UK Corporate Governance Code to require companies to report annually on their boardroom diversity policy and to include gender diversity in the evaluation of Board effectiveness.
The UK gender gap in 2012
Women continue to be under represented in senior management and on corporate Boards in the United Kingdom. As at October 2012, 15% of the directors of FTSE 100 companies were women, and only 9% of the directors of FTSE 250 companies were women.
In total,11% of FTSE 100 companies and 46% of FTSE 250 companies have no women at all sitting on their Boards.
In the insurance industry, Admiral, Aviva, Lloyds, Old Mutual and Royal Bank of Scotland have all pledged to meet Lord Davies' recommended target of a minimum of 25% representation of women on their Boards, whilst Standard Life already meets this target.
The Actuarial profession
So, how do things look for the Actuarial profession? The 2010-2011 data released by the Profession gives a snapshot of the gender breakdown of our students and Fellows. In total, 37% of students in 2011 were female, compared to only 22% of Fellows.
At the current rate of change, it should only take the UK Profession another 13 years to achieve gender parity, well ahead of the 70 years it will take to achieve gender-balanced boardrooms generally in the UK.
Interestingly, the statistics for honorary members show that only 7% (7) of honorary titles are held by women. Would some of the 10 female directors of FTSE 100-listed life companies be appropriate recipients of an honorary fellowship?
Corporate Performance and Women's Representation on Boards
Research shows that there is a strong business case for increasing the number of women on Boards in the UK.
Board Decision Making
A range of research demonstrates the positive impact that increasing gender diversity in senior management and Boards can have on the decision making of a company. This includes:
Women take their non-executive director roles more seriously, preparing more conscientiously for meetings
Women ask the awkward questions more often so decisions are less likely to be nodded through resulting in better choices being made
Female directors enhance board independence and reduce "group think" .
Furthermore, studies have shown that where governance is weak, female directors can exercise strong oversight, have a 'positive, value-relevant impact' on the company, and that a gender-balanced Board is more likely to pay attention to management and controlling risk .
A Leeds University Business School study shows that having at least one female director on the Board appears to cut a company's chances of going bust by 20%, and that having two or three female directors lowers the chances of bankruptcy even further.
Research demonstrates there is a correlation between increasingly gender diverse Boards and financial performance.
This research shows strong stock market growth among European companies is most likely to occur where there is a higher proportion of women in senior management teams. Companies with more women on their boards were found to outperform their rivals with a 42% higher return on sales, 66% higher return on invested capital and 53% higher return on equity.
Do we need 'Golden Skirts'?
Seventy years seems like a long time to wait for gender equality, and in the current period of economic unrest and shareholder activism, which company isn't looking to improve their financial performance and improve corporate governance? Are 'golden skirts' or quotas for women in the Boardroom the answer?
Norway became the first country to implement Board gender quotas in 2008, when the Norwegian Public Limited Liability Companies Act was amended to state:
If the Board of directors has two or three members, both sexes shall be represented
If the Board of directors has four of five members, each sex shall be represented by at least two directors
If the board of directors has more than nine members, each sex shall be represented by at least 40% directors.
The consequences for non-compliance with this Act include fines and the dissolving of the company (no public limited company has been dissolved on account of gender rules to date).
The Deloitte Study on Women in the Boardroom: a global perspective found that since introducing gender quotas, female representation on Norwegian corporate boards had increased from 6.8% in 2002 to 44.2% in 2011. In 2002, 470 out of 611 (77%) of the relevant companies were without a single female Board member.
This significant increase in the number of women Board members was partially achieved through an increase in Board size (rather than replacing existing members), and it is worth noting that Norway has significant state support for childcare, with generous maternity and paternity leave.
There was significant opposition to the introduction of quotas, with concerns about tokenism, the most skilled people for roles not being selected, and a lack of suitable and experienced women to fill positions.
However, as Lord Davies notes, quotas do not appear to have addressed the issue of women being promoted to become executives in their own organisation - only 2% of chief executives and only 10% of executive committee members were women in 2011.
From a financial perspective, academic reviews suggest that the balance sheets of successful Norwegian companies suffered a little in the short term but recovered quickly. By contrast, companies that weren't doing so well tended to benefit from having women on their boards.
We need you (and you need women)
Whilst no one would argue with the view that Board appointments must always be based on merit, it is imperative that Boards consist of talented individuals with a variety of skills, experiences and backgrounds. Women represent a largely untapped pool of such individuals, and having more of them has proven to be not just the 'right' thing to do, but also the "bright" thing to do - we cannot wait until the 2080s.
Alana Paterson is a Manager at Deloitte Actuarial and Insurance Solutions, and is a Fellow of the Institute of Actuaries (Australia) and a Certified Enterprise Risk Actuary.
References:1. Lord Davies Review, Women on Boards February 2011, http://www.bis.gov.uk/news/topstories/2011/Feb/women-on-boards
2. Bloomberg based on 19/10/2012 position
6. Izraeli, D. (2000) Women directors in Israel. In: Burke, R. and Mattis, M. (eds.) Women on Corporate Boards of Directors: International Challenges and Opportunities, 75-96. Kluwer Academic Publishers, Dordrecht, The Netherlands. Huse, M. and Solberg, A. G. (2006) Gender-related boardroom dynamics: How Scandinavian women make and can make contributions on corporate boards, Women in Management Review,21(2): 113-30.
7. ibid Lord Davies Review, Women on Boards February 2011.
8. Fondas, N. and S. Sassalos (2000), "A Different Voice in the Boardroom: How the Presence of Women Directors Affects Board. Influence over Management," Global Focus , 12: 13-22.
9. Maznevski, M. L. (1994) Understanding our differences: Performance in decision-making groups with diverse members, Human Relations, 47(5): 531-52.
10. Diversity and Gender Balance in Britain plc: a study by TCAM in conjunction with The Observer and as part of the Good Companies Guide, London, UK: TCAM. 2009
11. Women in the boardroom help companies succeed - Times article March 19, 2009 - Professor Nick Wilson LUBS
12. ibid Lord Davies Review, Women on Boards February 2011.
14. Ibid Lord Davies Review, Women on Boards February 2011.