Women on boards

According to the Sunday Times, the European Commission is drawing up a “voluntary” code fixing a minimum (30% by 2015, 40% by 2020) proportion of women on company boards. If enough firms don’t sign up by the end of this year, the requirements will be made mandatory.

At present, women only account for around 12.5% of positions on FTSE-100 company boards. In only 15 of these companies are there any female executive directors: the great majority of female board members are non-execs.

Advocates of this proposal point to ubiquitous management consultancy McKinsey, which in 2007 published a study – in collaboration with a feminist pressure group – which is claimed to support the view that companies with women in the boardroom perform better than those without. However, a look at this piece of work reveals that it is methodologically crude, with inadequate statistical controls and taking correlation for causation. Even McKinsey admits that the evidence is suggestive rather than definitive.

As for the explanation of this apparent link, this seems to rely in part on particular insights which women alone can bring to boardroom discussions.

This may be more plausible in relation to some fields (fashion, healthcare, retailing?) than to others (construction?). Or it may  be that women’s presence leads to more consensual and constructive, less confrontational, discussions. Well, maybe both of these are possible, but they do seem to be suspiciously stereotypical views of gendered behaviour.

In Norway (not an EU member of course) a 40% quota has been in place since January 2008. It doesn’t seem to have had any discernible overall impact on company performance one way or another. However it’s worth noting that the expansion of female representation on Norwegian boards has been largely in non-executives. There are still very few women in top executive roles. The new board members have been disproportionately recruited from politics and the civil service, with many holding multiple directorships because of the dearth of suitable candidates. This is a pattern we could expect to see repeated in the UK. It is not clear what people with such backgrounds – women or men – bring to top companies engaged in competitive international markets. The cull of quangos has reduced opportunities for the female Great and Good, but as one door closes, another opens….

Interestingly, there has been a tendency for some top ASA (the Norwegian equivalent of PLC) firms to delist to avoid the legislation – a possibility also presumably open in the UK. Paradoxically, a Cranfield University report has noted, there appear to be more female top executive directors in unlisted Norwegian firms than in those covered by the regulation.

The imposition of this sort of quota in the UK would be yet another irritant to firms based in the UK. It probably wouldn’t do a great deal of damage. But would it stop there? If women are underrepresented in boardrooms, so are many other groups “protected” under UK equality laws – ethnic and religious minorities, people with disabilities, the young, the old, the transgendered and so on. Quite where the line could be defensibly drawn on this is difficult to determine, but surely this way madness lies?

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

8 thoughts on “Women on boards”

  1. Posted 08/02/2011 at 14:22 | Permalink

    I wonder how many women there are on Cranfield University’s Council these days? I was a member for twenty-five years and I don’t remember many. The fact is that people who itch to interfere in other people’s businesses are never going to be satisfied. Give them an inch and they’ll take a mile (I wonder if there’s an equivalent metric expression? probably not!).

    I do recall some nonsense questionnaire being circulated at Cranfield to heads of groups asking about minorities, so I tried to answer in terms of homosexuals, Jews, non-whites,. etc. But when I asked if we were supposed to discover, and report, the religions professed by everyone’s grandmother, strange to say, I never heard back!

    Of course I’m in favour of discrimination, so I suppose it’s natural that I wouldn’t be sympathetic to this sort of thing. If having women as directors is ‘worthwhile’ in some cases, firms that deliberately refrain from appointing them may be shooting themselves in the foot. But it seems absurd to generalise in the way suggested.

    A competitive economy should allow, indeed encourage, variety and trial and error. By all means let’s have ‘all-women’ boards. The best answer when asked about ‘representation’ of minorities is: “I don’t know and I don’t care.”

  2. Posted 08/02/2011 at 16:18 | Permalink

    “Give them an inch and they’ll take a mile (I wonder if there’s an equivalent metric expression? probably not!).”

    I think not. The German equivalent is “Give them your little finger and they’ll grab your whole hand”. Equally fitting in this context, of course.

  3. Posted 10/02/2011 at 18:28 | Permalink

    Well this is all fine. If the McKinsey study is methodologically flawed, shame on them.
    My experience over thirty years as a professional woman is that men always grab anything good that’s going. When they need someone to take a hospital pass they look round for a competent woman who is paid on average 80% of her male peers’ salary. If they can get away with it she’ll end up taking the blame too.

  4. Posted 01/04/2011 at 17:09 | Permalink

    Such legislation, far from decreasing gender discrimination, would actually increase gender discrimination; against men, that is. Experienced, devoted and competent men would find themselves being ‘stepped over’ in favour of less capable women due to their being a far smaller pool of female candidates to choose from. This is simply a form of affirmative-action which, in itself, has proven to be a miserable failure within the public sector. Why does the EU think that it should be any different when applied to the private sector?

  5. Posted 02/04/2011 at 08:34 | Permalink

    Thanks Leon
    The solution to the problem you identify is is to have a represntative size pool of competent women to draw on. I believe this could be a temporary effect, althoughobviously galling in individual circumstances.
    Anecdotally – only in the private sector – I have known lots of extremely competent women who are passed over. I have known quite a few useless men who have had to be pulled out of trouble but get promoted rather than fired.
    I agree about incompetence in the public sector.
    Do you please have anything to say about the persisting pay gap between men and women? If so I would be glad to see it.

  6. Posted 06/04/2011 at 18:42 | Permalink

    Hilary. The pay gap between men and women exists merely because women choose to do different jobs and work less hours than men. That’s it.

    If a man and a woman do the same job; same hours, with the same level of experience, they get paid the same wages. There is no discrimination present when it comes to pay.

    As for the matter of their being less female company directors: How about we simply allow businesses to recruit whom they see fit? There is no question that they’ll choose the best people to maximize profitability; male or female. It’s in their economic and competitive interests to do so.

  7. Posted 18/12/2011 at 11:07 | Permalink

    Yup, that’ll do it. You have my appreciatoin.

  8. Posted 03/06/2012 at 07:39 | Permalink

    Do not make a very complex issue look simple, Leon. What you are saying may be true in some instances, but the pool of women is small because of a male-dominated environment, the old boys club and, come on, let us not deny that as it is fact! The only valid point I think that should be made in justifying non-mandatory arrangements as to the percentage of women on boards is the one of career choice. In that sense I agree there is a smaller pool of women. Just as there is a smaller pool of women interested in brick-laying and concreting. Extreme examples? Yes, perhaps, but why are we not picking up on the small pool of women electricians, pilots etc. etc. and, for exactly the same reason, a smaller pool of males for many, many other careers … hairdressers, beauty therapysts etc. etc.

    The research that is lacking is whether a large percentage of women do have all the qualifications and experience to get on boards and desperately want to sacrifice all things dear to them, like family and children, but they are cruelly overlooked. Once that research is undertaken and the outcome available, I’ll support legislation to force companies to sack incompetent males on boards and appoint 50% females just as I would support similar legislation to get gender equality in all other comparable careers. We may want to define “gender” as well, but that will lead to an entire different debate.

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