EHRC ‘should investigate legality of all-women shortlists’ for boards, says review

Consultant Charlotte Sweeney was asked by Business Secretary Vince Cable to review the executive search firms’ Voluntary Code of Conduct in September 2013. The Code lays out steps for search firms to follow across the search process, from accepting a brief through to final induction. She was asked to look at the Code’s effectiveness since it was introduced in 2011, and to make recommendations to strengthen it further.

Sweeney’s review makes 10 recommendations, of which the main ones are that:

– headhunters should commit to putting forward at least one strongly recommended woman on the shortlist submitted to Chairs for all board positions

– the Equalities and Human Rights Commission should create guidance for the headhunting industry on the legality of women only shortlists

– search firms should look to go beyond the minimum standards set out in the Code and should share their statistics on the male/female candidate ratio during the various recruitment stages with government. The report says this will enable government to assess how successfully the firms are in delivering on the commitments of the Code of Conduct

– a database of ‘board ready’ women should be created and shared with other stakeholders such as companies, investor groups and the 30% Club which promotes more women on boards

– the firms, government and Financial Reporting Council should all raise awareness about the existence of the Code. Companies should also challenge search firms to include in their contract that they will comply with the Code.

Business Secretary Vince Cable said: “The headhunting community is a crucial catalyst to introduce more capable women in the boardroom. However, they can often be 1 of the first hurdles that talented, board-ready women face when trying to reach the top, so I welcome any efforts to improve the transparency of the industry.”

Charlotte Sweeney stated: “Throughout my review there was a clear, articulated commitment from the majority of search firms to support the creation of more diverse and balanced boards. However, examples where the commitment was transferring into consistent and sustainable action were mixed. Further transparency across the industry will help identify where any further barriers are and inform where focused action is required.”

Charlotte Sweeney was previously International Head of Diversity and Inclusion for Nomura International PLC. During the course of her review she interviewed and challenged key stakeholders including chairs, board consultants, female directors, investors, HR directors, company secretaries and other interested parties to get a better picture of the compliance of the Code.

Lord Davies will publish his annual report on Women on Boards later in the month. The latest figures for the FTSE100 show that women account for 20.4% of all board positions – up from 12.5% in February 2011.

Commenting on all-women shortlists, Dr Sybille Steiner, Partner and employment specialist at leading law firm Thomas Eggar LLP, said: “It is very doubtful whether an all-women shortlist will be lawful both under UK and European law. Although the Equality Act 2010 allows positive discrimination in the context of recruitment and promotion, the employer has to demonstrate that the successful candidate is from a protected group that is disadvantaged or under-represented, and that the candidate is “as qualified as” any other eligible applicant. It is not entirely clear how the ‘as qualified test’ is supposed to work, but it clearly does require knowledge of the candidates’ abilities which means that an all-women shortlist can only be drawn up when the employer is satisfied that the candidates on the shortlist are the best available.

“Thus, having an all women shortlist from the start would require a change in the law. However, it also begs the question whether it is desirable to have such a change in the law or whether it would have the opposite effect of devaluing womens’ abilities and achievement.”

Meanwhile a report from PwC shows that the UK has made progress in narrowing the gender wage gap and increasing female labour participation, but that this progress has not been fast enough as the UK still lags behind many OECD countries when it comes to overall female economic empowerment. PwC’s second Women in Work Index shows that the UK ranks in 18th position out of 27 OECD countries in the latest analysis based on a measure that combines five key indicators of female economic empowerment: the equality of earnings with men; the proportion of women in work, both in absolute terms and relative to men; the female unemployment rate; and the proportion of women in full-time employment.

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