Since the Davies report set its 25% target, there has been some painful, but measurable, progress
A man and a women start their careers in the same role, at the same company on the same day. They are promoted at the same time, achieve the same level of seniority and retire at identical moments. How much more did the man earn?
The answer, at least according to a poll of 38,843 executives conducted by the Chartered Management Institute late last year, is £423,390. The higher up the ladder you climb, the bigger the pay differential too, with female directors earning an average salary of £127,257, £14,689 less than males in equivalent roles.
The statistics are shocking and caused a predictable stir, coming at a time when the issue of sexual equality in business – and more specifically of women rising to the most senior corporate roles – had started to gain momentum following the publication of Lord Davies’s report “Women on Boards” in February 2011.
At the time of the peer’s report, just 12.5% of FTSE 100 directors were female, while only 7.8% of board members in the FTSE 250 were women, and Davies set a voluntary FTSE 100 target of 25% of directors to be female by 2015.
Despite the lack of compulsion, progress has been made, and most observers predict that target will be hit, even if the statistics still appear cringeworthy. Now 17.7% of FTSE 100 directors are women, according to the Professional Boards Forum’s BoardWatch, with another 80 hires required to hit the 25% target. In the FTSE 250, 12.4% of board members are female and if Davies sets a 25% target on the mid-cap index, as he has suggested he will, then another 254 women need to be appointed.
Jane Scott, a director at the Professional Boards Forum, says: “2012 brought sustained progress in the number of women non-executive directors appointed to UK boards. Half of new non-executive appointments in the FTSE 100 since March last year went to women, and 45% in the FTSE 250. In 2008, the rate had been hovering around 10% to 12% of new appointments, so this represents a very significant uplift.”
However, some of the movement has been in the wrong direction. Last year’s resignations of Dame Marjorie Scardino and Cynthia Carroll – who ran Pearson and Anglo American respectively – robbed the FTSE 100 of half its female chief executives, leaving just Burberry’s Angela Ahrendts and Imperial Tobacco’s Alison Cooper. Some 7% of FTSE 100 executive directors, and just over 5% in the FTSE 250, are female. Meanwhile, eight FTSE 100 companies, plus 79 in the FTSE 250, still cling to all-male boards.
Yet in other parts of the economy the statistics are even starker. Research conducted for the Observer by analysts BoardEx reveals that out of Britain’s top 100 private companies, only 64 even publish the composition of their boards. Of those, 73% have all-male teams of executive directors, 51% have only male non-executive directors and 56% possess all-male boards. In the FTSE 250, the corresponding statistics are 71%, 32% and 28% respectively.
Ann Francke, the chief executive of the CMI, says: “It’s disappointing to learn that the track record for the UK’s top private companies is even worse than it is for the FTSE 250. Again, this underscores the endemic nature of the issue – and highlights that the UK’s firms are missing out on the potential growth benefits of a more diverse management culture at a time when we need it most.”
Among the large private companies with zero female boardroom representation are betting group Gala Coral, whose bingo customers are overwhelmingly female; the gym group Fitness First, which operates numerous women-only gyms; the catering firm Brakes Group; Ineos, the chemicals giant that is Britain’s second-largest private firm; and Virgin Trains, whose figurehead, Sir Richard Branson has been an outspoken supporter of business hiring more women to senior roles. Meanwhile, high street retailer New Look, which predominantly sells womenswear, has no female executive directors and just one woman – Leanne Buckham – serving as a non-executive.
A spokesman for Gala Coral says: “When it comes to the people in major positions it is the calibre of the person, not the sex.” A Brakes Group spokesman says: “While it is a fact that the board of Brakes does not currently have any women on it, gender is not a consideration when selecting employees at any level within the organisation.” Ineos did not return phone calls, while Fitness First and New Look declined to comment.
Still, there are companies on the list prepared to engage with the issue more intelligently. At Virgin Trains, a spokesman says: “Clearly, to have people of that level of seniority it depends to some extent on the [sector’s] recruitment policy of 15 years ago, when very few women were promoted to management positions. That is not to say that this will remain the case in the future. We look to recruit the best talent, male or female.”
Helena Morrissey, chief executive of Newton Investment Management and a founder of the 30% Club, which promotes hiring more women to boards, agrees: “You need to have worked 10, 20 or 30 years to become a chief executive. The level of women in the top executive roles largely reflects the mistakes of years ago. This is a problem that is not going to be solved overnight.”
Morrissey argues that the improvement in statistics since Davies suggests that a voluntary code can work, although she admits that is not proven. Still, others are pushing for more radical measures, including forcing companies to hit a certain quota of women directors.
Branson, who can counter criticisms of Virgin Trains by pointing to women running businesses such as Virgin Money and Virgin Holidays, is in favour of imposing quotas. In a piece for Entrepreneur magazine in September, he wrote: “I am not usually a fan of government involvement in private industry, but on this issue it seems to be needed. Norway took the lead in 2003 when its legislature passed a law requiring that at publicly listed companies, at least 40% of board members should be women. They were successful at meeting the 2008 target date, and since then the proportion of women on boards at Norwegian companies has risen to an encouraging 44%.”
The TUC, under the leadership of its first female general secretary, Frances O’Grady, is also a vocal supporter, and Sarah Veale, its head of equality and employment rights, says: “We can’t sit around for several generations waiting for the gender balance to improve all on its own. Quotas would give women the helping hand that the men who’ve been using the old boys’ network have been getting for years. At worst, quotas won’t be enough to boost the numbers and we’ll need to make other improvements. But if they do work, a whole new generation of talented women will have taken up their places on company boards, and those companies will be all the better for it.”
However, there are several high-profile critics of that approach, including Morrissey, Francke and Cranfield University professor Susan Vinnicombe, who sits on the Davies steering committee.
“Firstly, I’m against quotas as a point of principle as I think they are discriminatory,” Morrissey says. “Secondly, I don’t think quotas work. In Norway, yes, they got the number of non-executives to rise. But there just 3% of chief executives are women and the expected effect on the pipeline [of women coming through to fill the top jobs] has not materialised.”
When Ahrendts was asked whether she was in favour of the imposition of quotas at the end of last year, she came out firmly against them, stating: “I’m not. I think it’s dangerous … Whether it’s countries or companies, it’s about putting the best person in the job who can unite people and create value. A man could do this job just as well as I can.”
The pipeline – along with continuing the pressure to hit the Davies target – will be the key topic for those leading the debate in the UK this year. Francke says: “In 2013 we will be calling for more transparent reporting guidelines, including what percentage of executives are women and what they are paid. It is important to keep the pressure up. We know from research that the more diverse the culture within organisations, the better it is for producing results.”
In that field, as well as in the boardroom, there is much work to do. In October, the executive committees of 50 of the UK’s most valuable companies were analysed by the Guardian. The results showed that the management level one rung below the boardroom – the main source of talent to fill future board vacancies – employs women in only 14% of the roles. So the pipelines of the UK’s blue-chip companies are even more male-dominated than their boardrooms.