On a recent business trip to Germany I was shocked to hear in two separate conversations senior executives – both of whom I respect – state baldly that of course there are not enough qualified women for Supervisory Board roles in Germany. As an Executive Search consultancy with a passionate commitment to attracting the strongest and best suited candidate for a role, we very much beg to differ. This Overture sets out why.
We absolutely recognise that the percentage of women on Boards in both the UK and Germany remains too low. According to the Professional Boards Forum BoardWatch in January 2014 20.4% of FTSE 100 Boards Members were female. Similarly, the Women on Boards Index published by FidAR in Germany indicates that as of November 2013 21.9 % of DAX 30 Supervisory Board Members were female. Within the FTSE 100 there are only four female CEOs. No DAX company has a female CEO.
The political response to the dearth of senior female executives has been the introduction of a quota or the threat of the introduction of a quota. In Germany the coalition government is committed to introduce a 30% quota for women on the Supervisory Boards of some 120 larger, listed companies from 2016. A broader range of companies will also be required to define and publish goals for increasing the percentage of women at Supervisory Board, Management Board and senior management level from 2015 onwards. And in the UK, the Davies Report of February 2011 recommended that FTSE100 boards should aim for a minimum of 25% female representation by 2015.
This move towards a quota has provoked an at times hysterical response with a huge fear of tokenism. Fidelio belongs to a pragmatic school of thought accepting that change sometimes needs a sledgehammer and that the difference between a target and a quota is smaller than one thinks.
It is very clear that the corporate talent pipeline is failing to deliver adequate numbers of senior female executives. The reasons are abundant and well-rehearsed. Herminia Ibarra, Robin Ely, and Deborah Kolb’s recent Harvard Business Review article “Women Rising: The Unseen Barriers” touches upon the complexity of this issue with second generation gender bias also contributing to the imbalance in senior men and women. And quite rightly the question has been raised – does it make sense to start at the top?
We argue that (a) the composition of the Board does matter and therefore it is right to monitor and promote greater diversity at this level and (b), specifically at the Non-Executive level, talent is indeed available.
In an ideal world the DAX 30, the FTSE 100, along with the CAC 40 and other leading indices, would be generously populated with female CEOs and senior female executives. This would create an obvious pool of female talent for Boards.
But being effective as a Non-Executive Director is distinct from being successful as a senior executive. Both the Anglo-Saxon unitary Board system and the two tier German Board system distinguish between governance and supervision at one level and executive management at another. Importantly both Board systems recognise collective responsibility and the need for a blend of skills. (Although as Rudi Bogni, Chairman, Medinvest International SCA, noted in Fidelio’s November 2013 panel discussion “Building a Board with an Anglo-German twist”, the recent regulatory focus on individual accountability threatens to undermine this principle of collective responsibility.)
A Board is required to have the appropriate balance of skills, experience, independence and knowledge of the company to discharge their role effectively.
– UK Corporate Governance Code, September 2012
The Financial Crisis of 2008 provided a good testing ground for Boards in the banking sector. Weaker Boards and Boards that were subject to “group think” were particularly vulnerable. A body of research, including by Catalyst, a non-profit organisation with a mission to expand opportunities for women and business, and Newton, the investment house, has identified a “positive correlation between a diverse board membership and financial returns”. Indeed, a uniform but effective Board may well be an oxymoron.
We fully recognise that a Non-Executive Directorship of a large complex company is not to be undertaken lightly. All Board members should have a high degree of financial literacy and a good understanding of the business. The Board will typically include current or former CEOs of other businesses. But it is surely counterproductive for every Non-Executive Director to share this profile.
Good governance requires sound judgement, independence of perspective, the ability to question and challenge to good effect and the skills of influence and persuasion. As Fidelio has previously argued, there is no shortage of senior women who meet these requirements. These women may be in major corporate roles such as Corporate Affairs Directors, Marketing Directors or Finance Directors; or in consulting or advisory roles, for example, partners with leading law firms or strategy consultancies. Equally a challenging leadership role in a different type of organisation such as a high profile charity or membership organisation can provide very relevant experience; or indeed an academic background in a discipline relevant to the core business of the company.
Viewed from this perspective there is no shortage of qualified women for Non-Executive or Supervisory Board roles.
This conclusion does not obviate the need to improve the pipeline of senior women in executive roles. Much remains to be done and we recognise the answers are not simple. Dame Alison Carnwath in a recent FT interview argued that companies need to demonstrate a much more proactive approach to retaining high potential women. We also look with concern at the ratio of women studying certain heavy duty subjects that are highly prized in business. In Germany under 10% of the students reading mechanical engineering and electrical engineering are female (Statistisches Bundesamt 2012/2013). In the UK statistics compiled on Women in Engineering by the Women’s Engineering Society, February 2014, indicate that only 7% of professional engineers are female. And there is little evidence that these ratios are improving.
Companies exhibit ostrich-like behaviour about how much gender imbalances cost them.
– The Monday FT Interview with Dame Alison Carnwath, Chairman of Land Securities, 9th February 2014
Thus, we take to task those who lightly assert there are not enough qualified women to fill Non-Executive or Supervisory Board roles. There are. Nor do we countenance a lowering of standards. Quite the opposite. We advocate focussing on the qualifications needed to provide good governance and to create value for shareholders and stakeholders. This focus ineluctably opens new pools of talent. And one additional advantage of tackling diversity at Board level is providing more role models which in turn contribute to an improvement at the executive level.
Fidelio High Notes – February 2014
Fidelio delivers Board and Executive Committee Development Programmes
Governance, Public Affairs and Investor Relations – Fidelio’s Search expertise in demand
High level of IPO activity prompts demand for Fidelio’s PLC–readiness offering
Fidelio’s Real Estate Practice gains traction
Fidelio & leadership in technology start ups
Fidelio & Grace Belgravia, 17th February, an evening with Wasfia Nazreen, Founder, Bangladesh on 7 Summits
For more information on Fidelio Partners at info@fideliopartners.com