Around one fifth of senior finance roles are held by women: it is still far too few

Andrew Leck

LAST Tuesday was International Women’s Day, the hundredth International Women’s Day, to be precise. Did you notice? Did it matter?

There are, after all, multiple “days” recognised throughout the year. I hope you’ve all got World Post Day (9 October) and World TV Day (21 November) in your diaries too. Both are recognised by the UN; there’s an International Men’s Day celebrating its twelfth anniversary this year.

An “International Day” probably doesn’t mean as much as it should, but day inflation aside, recognising the persisting gender inequality that exists in the 21st century is important. With women making up over half the world’s population, that we are still dealing with the issue of gender inequality is a little bizarre. That we’ve just had the hundredth annual day recognising ongoing gender inequality just goes to show how infuriatingly slow progress has been.

Few sectors in the economy have an impressive record on equality. The statistics are depressingly familiar: women hold only 12.5 per cent of FTSE 100 directorships, shrinking to 7.8 per cent for the FTSE 250. According to Lord Davies’s recent report on women in the boardroom, 18 FTSE 100 companies have no female board directors at all; this rises to nearly half when looking at the FTSE 250. In Thailand, 30 per cent of companies have female CEOs; this shrinks to 9 per cent and 5 per cent in the EU and US.

The problem is particularly acute in the City. Compare the FTSE’s 12.5 per cent representation of women to the civil service, where 34 per cent of senior managers are female.

Entrenched inequality isn’t just bad news for women, but bad news for businesses too. There’s a wealth of research that shows diverse boards out-perform all-male boards. The University of Cologne’s 2005 “Sex matters” looked at the differences between male and female fund managers and found that women took less extreme risks with their investments.

That’s not to say women are inherently better than men at managing risk, but that by shutting women out of the boardroom (intentionally or not) businesses are missing out on different perspectives. A 2008 Columbia University report, “Girl Power”, provides data suggesting that companies with women in senior positions are able to use the different skills and perspectives on offer to outperform male-run rivals.

It’s not just that businesses are denying themselves different perspectives, but they are denying themselves talent, full stop. Roughly half of US and UK finance graduates are female – 49 per cent of ACCA students are female – but only about 20 per cent of senior finance positions are held by women. Where do all the female grads go? Are male graduates smarter than their female counter-parts?

No. But they are men, which gives them a bit of an edge. For young women entering the male-dominated financial services world it can be difficult to find other women to look to as role-models or find peers that they can confide in. Women are more likely to take career breaks than men. Then there’s the problem that senior managers – usually men – tend to recruit in their own image, which can make it hard for women to get ahead. This is compounded where promotion and reward mechanisms see decisions made based on personal affinity rather than on objective and transparent criteria.

European governments have stepped up their efforts to address the imbalance in the past couple of years. Norway, Spain, France, and Iceland all have quotas of some sort that require 40 per cent of boards of publicly listed companies to be female. A parliamentary commission in Italy has just approved a 30 per cent quota (although this has yet to be voted on), while this month the EU has launched a voluntary initiative to increase the female proportion of corporate boards to 40 per cent by 2020 from its current 12 per cent. Germany, Belgium, and the Netherlands are all discussing introducing a quota.

But is a quota the right way to go?

Not necessarily. Women are clearly under-represented and improvement is tortuously slow but mandatory quotas risk being too blunt a tool to correct this.

Boards must ultimately be about assembling the right collection of skills and experiences to guide a company. A fixed requirement to appoint board members on the basis of gender or any other physical characteristic threatens to undermine this: talented individuals may be unfairly denied their place on a board, while others may be over-promoted.

Anyone appointed to a board deserves to be respected for their achievement, not suspected for being there to tick a box. Women in senior positions need to become part of the culture of an organisation, not a representation of regulation. Quotas risk addressing symptoms, not causes.

In the UK, the Davies report for the government opted to avoid a quota, recommending instead that UK listed companies should aim for a minimum female board representation of 25 per cent by 2015.

“This is not about aiming for a specific figure and [it] is not about promoting equal opportunities but it is about improving business performance. There is growing evidence to show that diverse boards are better boards,” said Davies.

What is needed more than a quota is transparency. Companies need to set clear and transparent performance standards and evaluation criteria for promotions. Decisions need to be taken openly, not behind closed doors. Transparent diversity reporting is needed too, and it’s good news that this was included in the Davies report’s recommendations. More research is needed too to fully investigate the options.

Companies need to consider why they are missing out on the skills offered by their female employees. Mentoring schemes and support programmes are needed so that harsher regulation can be avoided later.

Women in business face an uphill struggle and the longer a fair amount of women are missing from the top, the rest of us miss out. Women deserve more than a day to have their injustices given exposure; transparency needs to be every day.