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Don’t Ask—Tell!

It’s time to stop requesting and start mandating more women on boards.

Summer 2010 By Alison Maitland

A snail could crawl from Land’s End at the southwest tip of England to John o’ Groats in the far north of Scotland and halfway back again in the seventy-three years it would take, at the current rate of progress, to achieve gender parity on the boards of Britain’s largest one hundred companies.

Doubtless, a passing car would squash the snail long before it would complete its journey, but the parallel, drawn in a report by the Equality and Human Rights Commission, makes the point well. It’s a matter also relevant to the United States, where women’s share of Fortune 500 directorships has stalled at 15 percent, only three points higher than in the United Kingdom.

In seventy-three years, not only will the snail be long dead, so will I, and most of you. Is that really how long we have to wait?

If so, the Anglo-Saxon business world risks being left behind. A growing number of countries elsewhere are deciding that asking companies politely to redress gender imbalance is ineffective. So we’re seeing a raft of quotas and targets to enforce change.

First came Norway’s legislated 40 percent gender quota for listed company boards, which other countries initially dismissed as maverick but is now attracting international interest. Norway acted not on a whim but after years of pressure on companies had made little headway.

Spain then followed with a law recommending, not obliging, companies to include at least 40 percent women on boards by 2015. And most recently, France too has taken the plunge with a Norwegian-style gender quota law.

In Germany, where female executives are almost completely absent from top company boards and senior management, Deutsche Telekom’s decision to take unilateral action has triggered fierce debate about quotas. It has set its own internal target for 30 percent women in middle and senior management by 2015, more than twice the current level.

A breakthrough is also taking place in Australia, where women currently hold only 9 percent of directorships of listed companies. Corporate-governance changes are expected to be implemented soon requiring firms to set measurable targets for women’s advancement, report annually on progress, and, if they fail to do so, explain why. Boards would also have to say what skills and diversity criteria they look for in new board appointments.

Why the change of pace? I believe the banking crisis and subsequent economic devastation has increased the pressure on governments and companies to act. Pre-crisis, it was easier for resistant CEOs, chairmen, and boards to argue that “business as usual” was just fine and that there was no pressing need for fresh perspectives and questioning voices at the top. That argument no longer holds.

We now know the dangers of groupthink, which lulled directors into a cozy sense of security when they should have been asking challenging questions. In a post-crisis report on London’s financial sector, the influential Treasury Select Committee of the House of Commons said that “the lack of diversity on the boards of many, if not most, of our major financial institutions, may have heightened the problems of ‘group think’ and made effective challenge and scrutiny of executive decisions less effective.”

There are, moreover, pressing business reasons to act. At a colloquium in Germany, a senior male executive spoke up in favor of quotas. He said he was desperate to recruit more talented women to his team, but when female candidates found out how few women the business employed, they said they would prefer to work for a more female-friendly competitor.

I’m also hearing British business­­people, who a couple of years ago would have dismissed quotas, say that something dramatic needs to happen to break the dam and let the untapped talent flow in. “I’ve been in the City for thirty years and nothing has changed,” exclaimed one senior female executive.

So will Britain and America follow the example of other European nations? The United Kingdom’s new Conservative prime minister, David Cameron, has pledged to redress the boardroom imbalance, albeit not via quota laws.

In a pre-election manifesto on equality, he stated that any listed company with less than 30 percent women on the board would have to explain what steps it was taking to raise the numbers. Com­panies would also have to ensure a 50/50 gender split on long lists for directorships, as well as publicly advertise every board vacancy.

It will be interesting to see if he holds to this promise. As I write, many are criticizing him for appointing a heavily male-dominated coalition team, with four women out of twenty-three ministers and only one holding a senior ministerial post. This is in stark contrast to the gender-balanced ministerial teams appointed when new leaders took over in France and Spain.

As for the United States, with its contentious history of affirmative action, my expert friends tell me that quotas are highly unlikely because they would risk falling foul of the law or the Constitution. Other countries’ actions are adding to pressure for change, however, and the SEC’s requirement that boards disclose how they address diversity is at least a start. The United States and United Kingdom must be careful they do not end up the laggards, especially as other countries snap up the crème de la crème of international women directors.

I’m no fan of quotas, but I see the arguments against them weakening in the absence of significant movement by other means. Legislation, or even the mere threat of it, can act as a catalyst to sweeping changes in attitudes and behavior. When legislation requiring motorists to wear seatbelts for safety was proposed in the United Kingdom in the 1970s, there was an outcry from those who saw it as an infringement on personal liberty. But people started wearing seatbelts even before the law finally went into effect in 1983, and today hardly anyone fails to belt up.

To ensure a steady stream of women onto boards, we also need more women in senior management. This means tackling the cultural issues inside companies that often drive out able, competent women. A fascinating new study by Ruth Sealy of Britain’s Cranfield School of Management shines light on the problem through the experiences of senior female directors at global investment banks. The surveyed women said that early in their careers, they assumed they would be judged on merit as long as they played by the same rules as the men. Once they reached senior roles where they had few female peers, however, they became aware of the subjective judgments made about them that could hamper their and other women’s further progression.

Some felt that being true to themselves and their principles would block further advancement because they were not seen to “fit” the organization. They said others did not value their way of working, that there was strong pressure on them to adapt their behavior, and that politics took priority over merit. More than half were seriously thinking of leaving their bank or the sector altogether.

Will a shift to gender-balanced boards be enough to promote genuine meritocracy inside companies? Having women in senior executive roles sends a more powerful message to the organization than appointing female non-executive directors from outside. Can a change in board composition alone tackle long-ingrained views of what a business leader looks and sounds like? Perhaps it can, if the change is as sweeping as it has been in Norway. As Arni Hole, director-general of the Norwegian Ministry of Children and Equality, puts it, quotas have “changed the mental images of women’s abilities and possibilities forever.”

Alison Maitland ALISON MAITLAND is co-author of Why Women Mean Business, just published in paperback. She is a former longtime writer and editor for the Financial Times, director of The Conference Board’s European Council for Diversity in Business, and a senior visiting fellow in the Faculty of Management at Cass Business School, London. She can be reached via alisonmaitland.com.