“It was a very successful campaign.” That is how Professor Susan Vinnicombe describes the outcome of the 2015 Davies Report.
She points out that in 1999 there were just 6.7% of women on FTSE100 boards. By 2010, this had incrementally risen to 12.5% when Lord Mervyn Davies was approached to do an independent review. His final report aimed to double this figure, something that it more than achieved, with the total number standing at 26.1% by the end of 2015.
This is all the more impressive given that to achieve this target, the UK needed to maintain a healthy turnover of directors at FTSE100 boards and that women needed to secure one-third of all new appointments to the board. Alongside this, Professor Vinnicombe is keen to underline how much the UK has achieved using voluntary means. At the time when Lord Davies was approached, MEP and vice-president of the European Commission (2010 – 2014), Viviane Reding, was pushing for European countries to regulate on this issue and proposing a target of 40%.
Professor Vinnicombe describes her time sitting on the Davies Committee with some relish saying it was “an amazing force for change”. She makes a number of references to the commitment of the individuals, particularly Davies, whom she describes as: “super committed, very open, very willing to listen to challenges, and [someone who] put a huge amount of effort into promoting it and challenging other chairmen.” This highly effective engagement strategy resulted in the UK leading “the most inclusive initiative on pursuing gender diversity” and now being ranked sixth in the world in terms of gender diversity in the boardroom.
She argues that while the UK largely decided against the use of mandatory targets, regulation that was introduced in the form of ‘narrative reporting’ (all FTSE100 companies had to report the numbers of women at different levels in their company) and the prospect of possible regulation played a key role.
“It was not a huge thing but it was certainly symbolic and we did find that there was a big increase in how seriously companies took it and how much information they gave.”
Setting the bar high
With this in mind, the situation would appear to be moving in the right direction. The Davies Committee’s successor, the team led by Sir Philip Hampton and Dame Helen Alexander, released its own recommendations last November. These set the bar even higher, calling for the number of women at board level in FTSE100 and FTSE250 to be at least 33%, with an additional target of the same percentage for women at the two levels below the board. Professor Vinnicombe describes this as an ambitious target, pointing out that the dynamic that needs addressing is different and that the UK is actually losing women at the levels below the board.
It is also notable that most of the increase in women in the boardroom has come from a rise in NED roles. The shape of the board has changed. As Professor Vinnicombe highlights, in 1999, it was roughly 50/50 executive director and NED, a number that has altered to more than 60% NED roles. She argues that while opportunities for women have opened up, there are still very few female executive directors (currently seven in the FTSE 100). Alongside this, few women move beyond their NED roles into senior executive positions, underlining the glass ceiling that remains in the boardroom. In essence, while progress is being made on diversity, serious challenges remain.
The need for shared engagement
So, what’s the best way to effect further and beneficial change? Professor Vinnicombe points out that the issue doesn’t need explaining and that most senior executives understand the benefits of greater board diversity. The problem comes where there is a lack of engagement and a failure to commit to doing something.
In this respect, reaching out to all stakeholders is something that Professor Vinnicombe regards as vital. She talks about the trend of women being over-mentored and under-sponsored. As she points out, “women don’t need fixing”, but they do need the support of senior male board members. Sponsorship, she argues, “should be a shared responsibility”. With this in mind, it is the senior male board members that she wants to see greater engagement with, arguing that without it, and without their better understanding of the challenges that women face in the workplace, nothing will change.
Women are over-mentored and under-sponsored. They don’t need fixing, but the support of senior board members.
Pursuing this point, Professor Vinnicombe calls for greater transparency, stronger reporting and a real commitment to action, ideally quantifiable goals.
Investors for equality
Another area where Professor Vinnicombe would like to see more action and engagement is through the work of investors. She reveals that certainly in the case of the UK, investors have been the one community that has failed to engage to the degree that they could have done with both the Davies Committee and Hampton and Alexander team. She points to the US where investors have created more momentum for change through being more active at AGMs, where they’ve asked questions about diversity and related issues. Professor Vinnicombe argues that if more investors could challenge companies and become more engaged with them on issues like boardroom diversity, then this would be very helpful, regarding the pressure that they can effect as being a “key catalyst”. She concedes however that while there are signs that shareholders are engaging more, there is a still a long way to go.
Investors can be a key catalyst for bringing about board diversity
Creating meaningful change
Ultimately Professor Vinnicombe argues that if companies aren’t transparent and made to account for gender diversity, we aren’t even at the starting blocks. The more that investors do, the more attention the issue will receive, increasing the likelihood of meaningful change.
RI Quarterly vol. 11: Proxy season 2017
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Professor Susan Vinnicombe on The Davies Committee