Vedder Thinking | Articles A View From Across the Pond: UK Boardroom Diversity – Gender and Beyond
GlaxoSmithKline's recent announcement of Emma Walmsley as CEO, making her the seventh female FTSE 100 CEO, has focused greater attention on the merits of diversity at board level and how to achieve same. Indeed, GSK's chairman Sir Philip Hampton is leading a government review of efforts to increase the number of women in senior executive roles, and he has taken Ms. Walmsley's appointment as an opportunity to challenge whether government reviews and initiatives will be able to bring about meaningful and sustained change in this area.
The UK currently favours a voluntary, business-led approach to improving female board representation; there is no minimum legal quota for women on boards. In 2011, however, it was recommended that FTSE 100 companies aim for a minimum of 25 percent of female board representation by 2015 with one-third of new appointments being women. In 2015, a report commissioned by the UK Government found that women held 26.1 percent of board positions in those companies (compared to 12.5 percent in February 2011). The target now is for female board representation in the FTSE 350 of 33 percent by 2020. Listed companies are also required to establish a policy on boardroom diversity, including gender, and including measurable objectives for implementing it. A summary of the policy should be disclosed annually, together with details of the progress made in reaching the objectives.
Other EU countries have addressed the issue differently. The European Commission is openly concerned about the number of women on company boards, and on 1 March 2011, it called on publicly listed EU companies to sign a pledge to increase the presence of women on corporate boards to 30 percent by 2015 and 40 percent by 2020, by actively recruiting qualified women to replace outgoing male board members. There are also currently proposals for an EU Directive to impose a mandatory quota system for female non-executive directors. In the meantime, several countries, including Spain, Iceland and Norway, have imposed quotas, with Norway reaching 40 percent representation of women on its boards.
Employers wanting to implement diversity initiatives are advised to do so in a nuanced way, and in one which suits their business and their industry. If they are to be effective, initiatives promoting diversity need to be part only of a broader approach, one which will need a significant period of time to bear fruit and will likely depend on practical leadership from the top. Other areas to consider could include how to increase the pool of talent; adapting recruitment processes (including, for example, targeting equal numbers of male and female graduates and scrutinising the gender profile of candidate lists); offering flexible working to all and looking at issues of so-called "work-life" balance creatively; coaching, supporting and mentoring women at each and every stage of their career and developing the female talent pipeline; creating accountability for bringing about changes; and reviewing career paths and opportunities for promotion (with targets in place for male-to-female ratios). An important first step for employers includes monitoring the workforce profile and tracking the information needed to evaluate the workforce.
Equally important is that implementation of any such initiatives does not run afoul of employment law, in particular, anti-discrimination laws, which in the UK in general do not allow for positive discrimination or affirmative action. Discrimination can also arise from unconscious bias and stereotypical thinking, which underline the importance of robust and objective decision-making and the need for a holistic approach here, rather than a focus solely on percentage targets. To that end, employers with at least 250 employees will likely face mandatory gender pay gap reporting beginning April 2017.
The debate about gender composition of boards and the role of diversity in corporate governance more broadly is sure to continue. A wider view of diversity argues that boards can be enriched not only by members of different genders, but also by variety in a broad sense—experience, culture, age and background. Added to this are significant corporate governance initiatives recently announced by the UK's new Prime Minister as the UK prepares for leaving the EU. Ms. May's proposals include having a worker's representative on the board. This will be a novel and potentially significant change. Watch this space!
If you have questions regarding the issues in this article, please contact Jonathan Maude +44 (0)20 3667 2860, Esther Langdon +44 (0)20 3667 2863 or any Vedder Price attorney with whom you have worked.
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