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Why are boards still falling short on gender diversity?

6 Oct 2020 By Nada Kakabadse

Organisations with female directors enjoy better ethical, social and financial corporate performance, says Nada Kakabadse, so firms must push for better progress

Some of the UK’s biggest companies have been accused of failing to reach gender board diversity targets, in circumstances that could seriously damage organisational reputations and the opportunities offered by embracing fresh styles of leadership.

The lack of board diversity progression over the last quarter-century suggests that while self-regulation offers some capacity for change, there is still a very long way to go before truly inclusive corporate boards become the norm.  

In 2016 the Hampton-Alexander Review, an independent, business-led framework supported by government recommendations, produced guidance on how FTSE 350 companies needed to improve the representation of women on their boards and in leadership positions. The review set a minimum 33 per cent target for women on FTSE 350 boards, alongside the two layers of leadership below the board – the executive committee and the direct reports to the executive committee – by the end of 2020.

Almost five years on from the Hampton-Alexander Review’s launch, two FTSE 350 organisations – property group Daejan Holdings and software firm Kainos Group – reportedly still have no women on their boards. A further 39 have only one female board member, and 20 FTSE 100 companies have yet to meet the minimum 33 per cent target.

This shortage of female directors is puzzling, particularly given extensive research showing organisations with senior female leaders financially outperform those with no women at the top. The evidence indicates that having women on boards improves ethical, social and financial corporate performance, as well as monitoring and strategic objectives. The underlying findings show that women are more empathetic, compassionate and all round better communicators.

There are many reasons for the slow ascension of women to the board. Their career journey can be influenced by work-life demands and stifled by the persistent old boys’ network, which excludes women from the information and relationships needed to move into C-suite roles. At the same time, many women are unable to see themselves as top executive material, while some male leaders can overlook them as potential successors for this same preconception.

Unfortunately there are now even more questions about how female leaders will fare in the wake of the economic stagnation brought about by Covid-19. While companies are struggling with uncertainty and volatility, decision-making and the process of finding the appropriate strategy are the primary challenges.

In the current climate many boards may no longer see gender diversity as a priority. However, with more organisations planning to increase remote working beyond Covid-19, the flexibility this offers may attract more women to senior positions.

Achieving board diversity requires greater outreach efforts into the marketplace, while avoiding filling vacant positions with people known through personal and professional networks. Whether it’s unconscious bias, laziness or a deliberate effort to pick from personal networks first, many boards begin their search by looking for people who reflect the existing status quo.

Many organisations continue to view leadership in terms that are considered to be typically male: self-reliant, assertive, competitive, risk-taking, independent, dominant and task-focused. Rightly or wrongly, it may be the case that women need to master a mix of traditionally perceived feminine and male behaviours to succeed and be viewed as ‘strong’ leaders.

Boards should periodically undertake an audit of their skillsets and consider what abilities are necessary to get on to the board, given the business the company is in. They should then compare the skills they have and identify if any are missing. This could highlight that, for example, they need somebody who understands digital technology. Then they can choose the opportunity to build in diversity by asking questions such as: ‘Do we have the variety of diverse perspectives necessary to deal with complex problems and create innovative solutions?’

It is also important to revisit any existing diversity ideology. For example, is the board focused on demographic characteristics or does it take a more holistic approach? To benefit from diversity, boards need to cultivate a collegial culture where members’ perspectives can be freely expressed and valued in a safe and trusting environment that accepts conflicting and diverging opinions. The chair is responsible for the overall stewardship of the company, leading the board towards a new environmental, social or governance goal while creating an accompanying culture of responsibility.

Looking to the future, women (and men) should adopt new leadership models that are inclusive, collaborative, caring and considerate of others. There is little doubt that all organisations can benefit from having more diverse boards.

Nada Kakabadse is professor of policy, governance and ethics at Henley Business School

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