What’s driving gender and ethnic diversity in the boardroom?
The subject of gender and ethnic diversity in the boardroom has been receiving considerable global attention. Opinions have stemmed from every group interested in seeing change within corporate boards and management hierarchy.
Even politicians have entered the fray. The UK government has been heavily involved in raising the profile of women in business, appointing Labour peer Lord Davies, a former banker and UK government minister, to report on gender diversity in the boardroom. Its focus is now shifting to the issue of black and minority ethnic (BME) representation at board level.
The Norwegian government recently passed legislation requiring that 40 percent of the directors of publicly listed companies in Norway be women. The Indian parliament recently enacted the new Companies Act requiring every listed company to appoint at least one female board director.
Other countries such as Belgium, Italy, the Netherlands, Spain, Brazil, Iceland and Malaysia have imposed quotas for publicly-listed companies, whilst Canada’s Ontario Securities Commission has drafted a ‘comply-or-explain’ rule.
But what is driving this issue of diversity and is there any substance to claims being made for and against? Is the push for greater gender and ethnic diversity based simply on a perceived discrimination, is it based on the fact that greater diversity actually improves corporate financial performance, or is it based on something entirely different?
There is no question that women and ethnic minority groups are under-represented at senior management level and in the boardroom. But does this necessarily require political intervention to correct?
Particularly in relation to gender diversity, opinion seems divided. There are numerous studies that support both points of view regarding having more female representation in the boardroom. Some reports suggest that having more women in non-executive positions improves financial performance and makes a difference for investors in terms of equity market returns. Others show no evidence to suggest that having more women in the boardroom either increases or decreases the company’s productivity.
From my experience, the many female executives I come into contact with firmly believe that a seat on the board must be earned and not given on the basis of gender or ethnic background. They abhor the suggestion that just because they are female they should be given the opportunity to serve on company boards.
What companies need is not misguided political interference in board diversity but a real diversity of thinking. In a marketplace that is changing more rapidly than at any time in history, improved financial performance will materialise when companies develop a broader range of management thought processes.
There is ample evidence to show that women bring complementary leadership styles to the workplace and that can be of significant benefit. With the changing employment landscape, there is a growing need for a greater team-oriented, collaborative and non-competitive culture within organisations. This is an area where women excel.
Not only have markets changed but so, too, has consumer buying behaviour. In the past, consumer influence was often overlooked in the marketing and sales processes. Today, there is increased realisation of the magnitude of the effect that individuals now have in the buying process. The fact that more than 80 percent of household purchasing decisions today are made by women, astute business leaders know the powerful effect talented women, at executive and non-executive level, can have on their company.
Furthermore, when operating in a global marketplace, senior executives and adroit board chairmen will ensure that they have appropriate ethnically diverse talent at executive level to ensure they not only build, develop and communicate effectively in culturally diverse markets, but also remain competitive.
If governments want more women in the boardroom, the starting point is the pipeline of talented and experienced women in senior management positions. At junior and middle management levels, there is little difficulty in women progressing their careers. However, there is a significant drop-off of female executives moving from middle management into senior management positions.
There are numerous opinions expressing the reasons why, but if business leaders want to capitalise on opportunities that will arise in this rapidly developing digital era then they need to do much more to attract and retain top female talent at executive level.
Two areas that can produce significant benefits for all are remuneration parity and a greater balance between work and family life. These two will ensure more talented women remain in the workforce which, in turn will provide the corporate pipeline with more potential female executives for the C-Suite and boardroom.
There is no place in business today for the imposition of box-ticking gender and ethnic exercises to satisfy politically-motivated quotas for the boardroom. Women and BMEs certainly don’t want them. Free markets will dictate appropriate solutions, but what ultimately matters for employees, shareholders and others is that effective corporate and sustainable leadership policies are implemented, irrespective of the gender or ethnic issue.