International Women’s Day – Women, Boards and the Three Next Steps

International Women’s Day has achieved a prominence in recent years that’s to be welcomed.

Fidelio has been a strong and vocal force in increasing gender balance in the Boardroom on an international basis.

In the past twelve months alone:

• Fidelio hosted two iterations of the A Seat at the Table programme creating a pipeline of talented female CEOs and Chairs
• This pipeline resulted in CEO and Deputy Chair appointments and shortlisted Chair nominations
• Fidelio has also been accredited for the second year in a row by the Hampton-Alexander Review in the beyond FTSE 350 category reflecting the breadth and international scope of our search remit
• Fidelio also hosted the first of our Frauenquote seminars in Germany, looking at progress towards gender balance in UK and German Boardrooms and meeting with great energy and impatience from male and female executives alike
• And last but absolutely not least, 50% of Fidelio appointments at Board and executive level were female.

While we and many other firms are making strides, there still remains a very substantial way to go:

• In the UK only 5% of the FTSE 100 Chairs and 7% of CEOs are female.
• In Germany there is just one female Chair in the DAX 30. There has been some progress on the 30% target for female directors on DAX Supervisory Boards, but at the Executive Board level and below progress has been very uneven.
• In the US just 4% of Chairs even in the broadest S&P1500 index are women. The US lags many European markets in overall Board gender diversity with just 20% women directors compared with in Norway (42%) and France (39%), which lead the global table.

So on International Women’s Day Fidelio sets out three critical steps to continue to move the dial towards gender balance in the Boardroom:

1. Focus on the Chair appointment process
2. Use evaluation to identify the main obstacles to greater diversity and set out clear measurable recommendations
3. Recognise that chairing a diverse Board can be tough and therefore provide support and development

Step 1: Focus on the Chair Appointment Process

A sharp focus on the appointment process for Chairs is needed to drive progress, something that has been highlighted by the Hampton-Alexander Review.  The number of female Chairs in the UK has actually fallen recently, and though there is bound to be some variation over time, the increasing number of woman directors should be leading to significantly more Chair appointments.

Increasingly Corporate Governance codes across Europe are focusing on how Board and Chair appointments are made, creating an opportunity for leading quoted companies to move towards a transparent and rigorous search process. The clear risk of relying too heavily upon prior FTSE100 Chair experience is looking backwards; the next Chair will almost certainly be facing a very different set of challenges.

Insisting upon a diverse long list and short list for Chair roles, which must include strong female candidates, could make an important difference. These candidates may well bring Chair or SID experience from other geographies or other types of organisations, and this should prompt the Nomination Committee to think much more rigorously and critically about the role description for the Chair, and about how the role must evolve. Here the work that was originally done in the UK starting with the Davies Review has clearly helped to move the dial, and there is a strong opportunity to do the same at Chair level. Once the numbers start to move on Chair appointments this will send a powerful signal to women embarking on a Board career, and to those at the executive level as well.

Step 2: Use Evaluation to Identify the Main Obstacles and Make Clear Measurable Recommendations

Increasingly, Boards are required across most jurisdictions and most types of organisations to regularly conduct evaluations, and to periodically – typically once every three years – commission an external Board evaluation.

In the UK, the Financial Reporting Council’s Corporate Governance Code now also gives the Board and the nominations committee the task of reviewing how diversity is being promoted, not just at Board level but also throughout the organisation. Chairs can use the evaluation process to really understand how supportive, engaged, and connected the Board is to diversity initiatives within the organisation, and also harness the recommendations that they bring from other Boards they sit on. Increasingly the evaluation is also a means of socialising new concepts within the Board; fresh approaches to diversity and gender balance can be included.

It is accepted best practise for Boards to report the key high level recommendations of an evaluation back to shareholders, and progress on diversity should be a key element of this communication with investors. If the asset owners also insist on progress here, we will see the dial continue to move on senior female appointments in leading quoted boardrooms.

Step 3: Recognise that Chairing a Diverse Board Can be Challenging and Provide Appropriate Support and Development

We often assume that chairing a diverse Board, and leading Board diversity is straightforward. It is not. An experienced South African Chair made the very simple point to us a few years ago that chairing a homogeneous board is very simple, while chairing a heterogeneous board requires significant Chair skills.

Boards with a high degree of homogeneity can feel very comfortable but equally can easily lapse into group think. By contrast, Boards with diverse composition and perspectives may well feel much less comfortable and can indeed lapse into dysfunctionality. Chairing is not simple.

In a changing business world dealing with sometimes rapid shifts in social norms – #metoo is a case in point – it is not surprising that even experienced Chairs can feel well out of their comfort zone and fearful of giving offence without fully understanding why.

Rather than berate Chairs we would do well to recognise the exceptional combination of skills demanded by the Chair role:

• Deep business understanding
• Exceptional stakeholder engagement skills
• Sharp antennae to detect weak signals
• Ability to embrace change and navigate complexity
• Firm grasp of the public good

The heightened scrutiny of the Chair – including with regard to diversity – cannot be ignored. This is an exceptionally tough role and currently there is little preparation; the requirements go well beyond a successful executive career.

Diversity will be better served if Chairs have the opportunity to learn their craft. Fidelio’s Chair Masterclass draws upon the wisdom of highly experienced Chairs, shareholders and stakeholders. It recognises the demands being placed on the Chair, provides a sounding board for new Chairs or those seeking to hone their skills. Significantly, the Masterclass will also address how effective Chairs will embed diversity into their Board succession planning and will create a culture at Board level that is supportive of inclusion and diversity across the organisation.

Conclusion

Fidelio is optimistic that greater gender balance can be achieved in the UK and across Boardrooms in Europe, the US and indeed globally. This can be realised through focussing on proven methods that are known to work and ensuring that the Chair role is subject to a much higher degree of diversity through:

1. Transparent search processes
2. A more proactive use of Board evaluation
3. Development and induction

To learn more about moving the dial on Board diversity and creating greater gender balance, or for further details on Board search and Board evaluation, please contact Gillian Karran-Cumberlege.

And in the meantime, Fidelio wishes clients, candidates and our very talented A Seat at the Table Alumnae a very happy International Women’s Day and do keep up the very good work.