Women on the verge

The exhortations to companies by Derek Higgs, Laura Tyson and, longer ago, Sir Adrian Cadbury to appoint more women to their boards are at last being acted on. New research from Cranfield School of Management’s Centre for Developing Women Business Leaders shows that the number of female directors in the FTSE-100 has topped 100 for the first time, up 20% this year to 101 (before the departure of FD Helen Weir from Kingfisher). Two companies – AstraZeneca and Marks & Spencer – now boast four female directors (a third of their board), with women making up 20%-30% of the board in a further nine companies. Seven companies (J Sainsbury’s, Shell, BAA, Prudential, Aviva, Legal & General and HSBC) have three board-level women and 13 have two.

But while there has been steady progress since Cranfield launched its Female FTSE Index in 1999, we mustn’t get carried away. Most of the new appointments were made by companies that already had women sitting on their boards; only seven new organisations (including BAT, Standard Chartered and Rolls-Royce) came into the fold, and there are still 32 top companies with no women on their boards at all.

The number of women executive directors has increased by only two to 17, and there remains just one female chief executive, Pearson’s Marjorie Scardino, and one female chairman, Baroness Hogg of 3i. Just one in 12 FTSE-100 directors is a woman. However, better news on the FD front – almost half the female executive directors are FDs.

Despite talk of glass ceilings, many of the women who step off the corporate treadmill do so for positive reasons: they are not prepared to make the sacrifices required to perform a top job and set up their own businesses as a way of keeping control of their lives. In some areas of the UK, two-thirds of new businesses are started by women, according to accountancy firm BDO Stoy Hayward.

But SMEs’ gain is big business’s loss. Susan Vinnicombe, director of the Centre for Developing Women Business Leaders, claims companies with a strong female representation at board level have better corporate governance and social responsibility records, and outperform their peers in terms of market capitalisation. Eighteen of the top 20 companies by market capitalisation have women directors, compared with only eight of the bottom 20 companies.

“Boardroom diversity is a good barometer of competitiveness or complacency,” says Glenda Stone, chief executive of Aurora Gender Capital Management, a company that helps businesses increase their productivity and performance by better attracting, retaining and developing talented women.

“I don’t invest in companies that look as though they don’t understand the future – the kind of places headed up by five crusty old white guys. How can companies understand complex and global business issues if they lack diverse perspectives?” says Stone. A blinkered approach will increasingly limit their growth.”

The different skills, experiences and perspectives women bring to the board are valuable both intrinsically and because they are different.

What’s more, women are more prepared to ask ‘how?’ and ‘why?’ than men – a useful attribute when most problems in companies stem from too little challenge from too many like-minded people on boards.

Ed Smith, senior partner at PricewaterhouseCoopers, believes the lack of women on the board and executive committee is becoming an increasingly critical reputational risk. “Companies failing to tackle the issue will find their brand, shareholder value and long-term sustainability severely compromised,” he says. But Lesley Mays, head of global diversity at Shell, believes having more women is “not just about numbers or reputation, but about changing the way organisations work.”

Leavening the largely monochrome nature of boards with different tones helps them respond more effectively to market and workplace challenges.

Influential senior women often help encourage the kind of flexible working policies that talented men and women are starting to demand.

And they can contribute at a pragmatic level too. Marks & Spencer’s recent lingerie campaign was run by the most senior women in the business and was, says HR manager Helen Webb, “one of the most successful campaigns we have ever had. Customers have praised its representation of real women.”

The dearth of senior women executives is not a women’s issue; it is a business issue. But it should be seen in the context of the need for a more diverse boardroom generally. The US Department of Labor predicts that by 2010, white men will account for less than 40% of the workforce, with a similar outlook forecast for Europe. Another disturbing finding from the Female FTSE Index is that one-third of women directors have titles compared with one-fifth of men. ‘Trophyism’ is as dangerous as tokenism.

Ann Burdus, non-executive at Safeway, Next and the Prudential, points out: “It helps having someone on the board who knows the price of a pint of milk or a tube ticket.”