Board Diversity - should gender and ethnicity have a quota?

Having seen a few snippets in quick succession on the matter, I figured it was as good a time as any to revisit Board Diversity, the gift that keeps on giving...headaches to Legal, Compliance and Company Secretarial departments all over Europe!

My initial interest in the matter was piqued by the potential dichotomy between having a Board that was "Fit and Proper" in the context of Solvency II or indeed the myriad Corporate Governance Codes within Europe, and the simultaneous push within the EU for setting quotas for a minimum percentage of female representatives on Boards.

Certainly a couple of years back, it looked like companies may be faced with a choice of meeting any gender quota (but with a Board that was not "Fit and Proper", if only due to lack of Board-level exposure and experience), or simply thumbing their noses at the quotas. The UK's current informal approach recommended by Lord Davies suggests that, while progress is being made on the gender front specifically, there is no danger of radical positive discrimination in order to meet a quota, regardless of who sets it.

I have therefore rather caustically covered the topic on previous posts (here, here and here) due to the hijacking of the word "diversity" as actually meaning "gender diversity" - seulement! There is evidently nowhere near enough working class (or working class origin) representation on plc Boards, not to mention ethnicity, disabilities and people who have served coal-face time in not-for-profit or charitable sectors - do they get a quota too?

All levity aside, there are rumblings from the UK Labour party that perhaps gender isn't the only quota worth talking about, floating the idea of ethnic quotas should they be elected next year. Bearing in mind the shamefully unrepresentative gender and ethnic make-up of the British members of parliament, and the triteness of his leader's behaviour when white-bloke hunting at PMQs the other week, he may wish to turn his attentions closer to home. That said, if the diversity debate has broken out of its gender-soaked malaise, it is cause to celebrate.

Dude? You're barred...

InsuranceERM have (unwittingly?) helped to perpetuate the idea of "diversity" being a debate that is overwhelmingly about gender in a recent round-table centred on how the Insurance industry "...can become more reflective of society" - which had no dudes in attendance!

While I certainly wouldn't argue that Insurance was, is, and will continue to be the "domain of the white male" for the foreseeable future, can that be remedied by excluding said males from a conversation on inclusivity of all things?

While the conventional pros and cons were discussed about Golden Skirt-style quotas, mandatory shortlisting of women for senior positions and mentoring, the child-rearing-sized elephant in the room was also tabled. The prevailing opinion seemed to be that it is encumbent on both employers and women to do a bit more during that phase of life to maintain career progression.

Had my two cents been sought (heaven forbid!), I would have added the "H" bomb into the mix. As a husband who works in another country from my family home, I personally offer an additional constraint to my wife's career every single working day, and one thing which won't change between generations is that one partner generally has to "take one for the team". Do the significant others of UK plc realistically provide more of a constraint on career development than any of the factors discussed by the InsuranceERM panel?

I would also have referenced Britain's blue-rinsed demographic timebomb, caring for infirm relatives, in this context, a job that most men manage to avoid, even when it's their parents! I have no first hand experience on the matter, so am reluctant to do more than float the idea, particularly when high-achieving female talent may have the means to outsource such activity.

Progress on the diversity issue therefore remains clunky, piecemeal and gender-obsessed. With every Lloyds (voluntarily?) taking the initiative, there is a Glencore or LSE who manages to clear the decks!

I certainly hope to see some progress on the gender percentage front soon, if only to hit a target so that we may switch the debate back to genuine diversity. With the topic gaining traction across the pond, maybe we won't have to wait too long.

Cranfield's Female FTSE Board Report 2012 - Grey Suits or Golden Skirts?

Having enjoyed tremendously the debate generating the momentum behind boardroom diversity recently (in particular that the debate hasn't managed to get any more 'diverse' than the subject of gender!), I read with great interest the Cranfield International Centre for Women Leaders research on progress regarding gender diversity on FTSE Boards.

While some amongst us still think of diversity in rather confused tones (Mr. R. Burgundy representing the traditional country club view here), attempts to evidence its worth to corporates began to gather last year.

2011 had put the topic of boardroom diversity firmly in the zeitgeist of corporate governance thought, thanks in no small part to an early leg-up from Lord Davies (specifically for women on boards) which was further sponsored by the FRC in both word and, later in the year, deed. This has recently been supersized by the European Commission Viviane Reding publicly on International Women's Day (classy), with the onset of gender quotas for EU-headquartered boards now looking increasingly likely.

My immediate interest only really extended to Level 2 system of governance advice from CEIOPS, as well as the fit and proper person article of the Solvency II Directive itself (article 42), and whether affirmative action as recommended by Davies and Reding this late in the day compromises compliance with article 42.1a ("professional qualifications, knowledge, and experience").

However, coverage of the truly lamentable levels of gender diversity have poured in from Singapore, Germany, Canada and the States (and indeed this article looks enviously across the Atlantic at the progress in gender diversity driven by quotas in mainland Europe, while simultaneously highlighting the horrific numbers from Japan), so it may be that the 'appropriateness' cart needs to come before the 'Solvency II compliance' horse in any case.

Back to the Cranfield research, I picked up on the following noteworthy elements:

Introduction by Women and Equalities Minister

• "Growing evidence" that more diverse boards perform better, yet none is cited
• Frequent references to "we" as in "women" - made me feel like an intruder for reading it!
• "...there can be no excuses for having a male-only board" - I would venture "contractual" as one reasonable excuse Ms May, bearing in mind the document acknowledges throughout that turnover will be slow!
• Lord Davies referenced as the "key driving force" with no doubt - I hope the authors of 15-20 years of Cranfield research papers felt appropriately slighted
• Lazily references the FRC's amendments to the Corporate Governance Code on the principle of "boardroom diversity" - the more influential the person, the more I am personally offended by the confusion between diversity per se and gender diversity. I am Manx, from working class stock, and state-school educated - from a FTSE board demographic perspective that is surely 'diverse', regardless of my gender!

Research

• Overall numbers of female executives are still abject for both FTSE 100 and FTSE 250 (p12) - an increase of 7 executive directors over a 13 year period
• The one organisation with a female CEO and CFO is...a fashion house (you couldn't make it up!).
• Of the insurers, there is one female executive director and no female chair (though that rings true for all but one FTSE 100 company)
• States aggressively (p13) that companies are "spectacularly unsuccessful" at promoting women once they have initially been hired
• Another weird reference to the gender disillusive "we" regarding the number of female directorships (p15) - I'm pretty certain that we all 'have' those directors!
• Arbitrarily comments that, now there are at least 50% of FTSE 100 companies have at least one female director that "we are moving away from tokenism" (p15) - I'm sure that the females on boards over the last decade are flattered by that
• An odd congratulations in bold is thrown out to Wolseley for hiring two female NEDs in the last year (p16), thus catapulting themselves up the FTSE 100 charts for gender diversity.
• Highlights the 9 FTSE 100 companies with no female board members (p16) - having looked through that list, they are predominantly miners/energy firms which you might struggle to call "UK" firms if they weren't listed here, and take their corporate governance requirements proportionally seriously (well highlighted in this article, driven by the same Cranfield Dr!).
• One brilliant scheme is drawn out in the Rolls Royce case study on p21 regarding "reverse mentoring" - this seems like the kind of scheme which, gender diversity aside, would help open some board members eyes to the realities facing their staff on a daily basis, and I would love to know more on the subject.
• 29 of the 47 new directors had no prior FTSE 350 experience (p24) - again, this draws back to my immediate concerns on Fit and Proper under Solvency II. This is supplemented by Christine Tacon's biography on p26.
• Confused coverage of BAE's case study, where the research (p34) talks of their "internal diversity targets", while BAE specifically reference "gender diversity" earlier in the piece.
• FTSE 250 chairs are told (p37) they "...should realise the benefits of boardroom diversity" and that "...ignoring the issue is no longer acceptable from a governance perspective" - again, what type!
• The Mitie case study talks of having a "diversity board" which is not only focused on gender, which sounds admirable.

Is there a danger that some companies are simply "playing" at it by loading up on female NEDs 'Golden Skirt' style like our Norwegian friends? Indeed, does playing at it bring any of the mooted diversity benefits, or just leave the same grey suits making the same hubristic strategic mistakes that we witness at the peak of every bubble?

Certainly the easiest way to bump up the quotas is to bring in some NEDs, and that is certainly the tactic evidenced throughout the Cranfield research. Aviva for example made the expected commitment to get their (at the time 23%) ratio of female directors up to 25% (fatten them up peut etre?), followed quickly by the appointment of another female NED allocated to the corporate responsibility committee.

If gaining NED roles is still a battle, then what hope for cleansing the executive suite? Deutsche Bank of course had their spectacular CEO stir the pot early last year some breathtakingly facetious remarks on making the boardroom prettier (with his own Head of Diversity biting back by passing him of as a "gentleman of the old-school", touche!). Forbes also recently threw their two'penneth worth in with a piece detailing why women will never become CEOs (which refreshingly is not afraid to throw accusations of 'nu school sexism' into the mix).

And what purpose does gender diversity (or indeed any diversity), forced or otherwise, actually serve? Eradication of Groupthink, which it would appear is sufficient enough to simply mention for it to be a problem (PS beautifully rebutted here)? Could it help curb executive pay, as both the High Pay Commission and the UK Prime Minister alluded to? Would it counter the evidence that men are naturally bigger liars (2nd story down), and can gravitate to top jobs off the back of this trait, rather than talent or career contribution? Could it even equalise the rather shabby pay gap (here as well)that somehow manages to stay below the lobbyists' radar?

However, I am looking at the topic from a rather blinkered Solvency II perspective at the moment, so I only question do I, as a buyer of insurance, really need the board of Pension Provider plc to be diverse enough to understand me and my plight as a consumer and a stakeholder (p7), or just pay me the right amount on time?