‘ONE IN, ONE OUT’ FOR FEMALE DIRECTORS
Study raises question of tokenism as FTSE 350 firms likely to appoint female director only as successor to another woman.
The UK’s biggest companies are likely to appoint a female director only if the post has been vacated by another woman, according to research that suggests sex bias is entrenched at the top of British business.
The report’s authors analysed the board composition and performance between 1996 and 2010 of companies listed on the FTSE 350 index, and say their research raises questions about whether companies are guilty of tokenism, and are failing to understand the moral case for bringing more women into the boardroom.
The percentage of female directors on the boards of FTSE 350 companies increased from about 2% in 1996 to more than 8% in 2010, according to the study, published in this month’s Economic Journal. But the research shows that whereas there was a 20% chance of a company appointing a woman if another woman had left its board, this fell to 10% when a man had held the post. This, the authors suggest, helps explain why men continue to dominate boardrooms.
“Companies often argue that a shortage of qualified candidates prevents them appointing more women to boards,” say Professor Brian Main of the University of Edinburgh business school and Dr Ian Gregory-Smith of the University of Sheffield. “Even if that were the case, in an equal world the chances of a woman securing a board appointment should not depend on the gender of the person who previously held the job.”
While there appears to be no pay gap at the executive level, the study found that appointments to these positions remain rare, with fewer than one in 20 executive directors being female.
Women have at best a one-in-five chance of being made a non-executive director, and those hired are paid about 8% less than their male counterparts.
“There is clear evidence that the process of making non-executive boardroom appointments is not yet gender-neutral,” Main said. “Once in the boardroom, women executive directors seem to be paid as well as their male counterparts. But for non-executive directors, the rewards for women lag behind those for men.”
In the past year several high-profile initiatives have tried to address the stubborn sex imbalance in British boardrooms. Among FTSE 100 companies there are only three female chief executives: Angela Ahrendts at Burberry, who is soon to move to Apple, Alison Cooper at Imperial Tobacco and Carolyn McCall at easyJet. Some have predicted it might take another 70 years to achieve sexual parity.
The success of Lean In, the book by Sheryl Sandberg, chief operating officer of Facebook and its first female board member, has sparked a global discussion about what needs to be done to ensure more women are appointed to senior corporate positions.
The EU has proposed a 40% target for female representation on the boards of listed companies by 2020. In 2003, Norway set a voluntary target of 40% females to be attained by 2005, but achieved this only in 2008 after making the ratio compulsory.
France, Finland, Iceland, Italy and Spain have embarked upon similar initiatives. The Department for Business, Innovation and Skills has set a target of 25%, to be attained in FTSE 100 companies by 2015.
A report commissioned by the department warned that a lack of diversity at the top could result in narrow decision-making and frustrate equality elsewhere in the company hierarchy.
The study suggests that there is no evidence having more women in the boardroom either increases or decreases productivity. But, its authors argue, claims that appointing more women will raise profits miss the point.
Gregory-Smith said that “the moral case for gender diversity in the boardroom” was unambiguous. “The challenge for companies and regulators is to adopt progressive policies that promote diversity even if there is no immediate payoff in terms of firm productivity. Our evidence shows they must try harder.”