At board level, diverse perspectives can lead to better-informed decisions and more effective decision-making that ultimately affect a firm’s bottom line.
Women now account for 19 per cent of FTSE 100 and 15 per cent of FTSE 250 board positions, according to a report from Cranfield School of Management, published earlier this month. While those numbers show that companies are doing a lot of work to make change happen and this is bourne out by my discussions with senior executives in the industry, there are still important cultural and diversity issues that must be addressed.
We must continue to examine and challenge the drivers of change and the factors that make a big difference, including succession planning, unconscious barriers and pipeline development. Reflecting the positive changes brought about in the adviser world by CPD, it is timely to encourage the same practices at board level, encouraging the basic tenets of demonstrated competence, identified knowledge gaps (and how to rectify them) and proving ongoing competence, which is certainly best practice evidenced in some of the companies.
In 2010, Lord Davies of Abersoch was commissioned to find out what was preventing women becoming board members and to develop a strategy to increase the number of women on the boards of listed companies. The original report recommended that the UK should have 25 per cent women on FTSE 100 boards by 2015. This year, the necessity to apply “good practice” was re-iterated by Lord Davies in an update encouraging firms’ senior management to publicise how many women are expected to fill the company’s senior management roles by 2015.
However, the issue is about more than just numbers. While numbers can show the progress we are making, we can also consider what factors are positively assisting or negatively hindering progression. The reasons for the slow progression of talented women through the succession pipeline remain unclear. Whether women are simply not inclined to pursue upper management roles or whether they are not being developed, selected and progressed is uncertain. We can also ask why the majority of women appointed to board roles are predominantly those who have previously held a similar position.
Leadership 21st Century is an FLSP initiative created in response to the key challenges expressed by the industry. It supports the sector’s need to rebuild public confidence through providing best practice statements along with practical tools and solutions. Although the initiative is not directly about gender diversity, if the recommended good practices were applied, then action might help remove many of the barriers that are clearly still evident in developing, promoting and appointing women for board roles.
L21C provides examples of good practice to enhance board effectiveness and includes key elements such as board culture and composition. It encourages gender diversity by urging firms to recruit to fill gaps based on a defined competence framework for board and executive committee roles.
Every firm in the FTSE 350 will receive personal copies of the industry-driven set of statements of good practice.
It was also developed with input from the FCA, the Financial Reporting Council and the Association of British Insurers and the British Bankers’ Association.
Business models and governance models are based on good practice, including measurable objectives for policy implementation, and tracked progress towards the desired outcomes. By creating these guidelines and tools, firms will be helped to implement good practices, evaluate current performance and provide clear evidence that they are transforming their businesses.
Good practices applied at board level will encourage women to feel an equal level of expectation as their male colleagues and thereby consider board-level appointments as part of their career path. Ultimately, companies may yet attain that 25 per cent of women board members by 2015.
By positively addressing cultural and diversity issues, companies can build a long-term legacy of better-informed, effective decision making at board level, thus assuring the financial services sector’s ability to compete and succeed in a rapidly changing world.
Liz Field is chief executive at the Financial & Legal Skills Partnership