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UK listed companies in the FTSE 100 should aim for a minimum of 25% female board representation by 2015, but the Davies report has fallen short of imposing mandatory quotas.
Lord Davies of Abersoch today launched his independent review into Women on Boards and has recommended FTSE 350 companies should be setting their own challenging targets and expects many to achieve a much higher figure than this minimum.
However, he has not ruled out quotas in the future.
Lord Davies was asked by Business Secretary Vince Cable and Minister for Women Theresa May in August last year to carry out a review into the barriers to increasing the number of women on the boards of UK companies.
The report is calling on companies to set targets for 2013 and 2015 to ensure that more talented and gifted women can get into the top jobs in companies across the UK.
Lord Davies is also urging chairmen to announce these goals in the next six months and chief executives to review the percentage of women they aim to have on their executive committees in 2013 and 2015.
Research from Cranfield University has highlighted a lack of female directors in Britain’s top businesses, with women making up only 12.5% of directors in the FTSE 100 companies in 2010.
The FTSE 250 companies have an even lower proportion of female directors at 7.8% and nearly half of them do not have any women in the boardroom.
Lord Davies said: ”Over the past 25 years the number of women in full-time employment has increased by more than a third and there have been many steps towards gender equality in the workplace, with flexible working and the Equal Pay Act, however there is still a long way to go.
”Currently 18 FTSE 100 companies have no female directors at all and nearly half of all FTSE 250 companies do not have a woman in the boardroom. Radical change is needed in the mindset of the business community if we are to implement the scale of change that is needed.
”This is not about aiming for a specific figure and is not just about promoting equal opportunities, but it is about improving business performance. There is growing evidence to show that diverse boards are better boards, delivering finanical out-performance and stock market growth.
”I have been pleased to see the huge amount of interest that this review has sparked both from individual businesses and industry groups. I hope that the recommendations I am announcing today will mark the beginning of a step-change so that more of our talented women get seats on our top boards.”
The report also calls on the Financial Reporting Council to amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity – this should include how they would implement such a policy and disclose a summary every year of the progress made.
Lord Davies also recommends investors should pay close attention to the recommendations from the report when considering re-appointments to a company board.
He also wants companies to periodically advertise non-executive board positions to encourage greater diversity in applications, and urges headhunting firms to draw up a voluntary code of practice addressing gender diversity in relation to board level appointments to FTSE 350 companies.
Norway has imposed female quotas of 40%, and France and Spain have also introduced mandatory quotas.
The report was welcomed by the Confederation of British Industry (CBI).
Helen Alexander, president of the CBI, said: ”The lack of women at board levels needs addressing urgently, and the best way of achieving this is through companies reporting on their progress.
”We believe firms should report against internally-set targets that reflect different starting points, the nature of particular sectors, and the size and structure of the board.
”The report contains good ideas to develop and sustain the talent pipeline to the boardroom, including harnessing the role of investors, executive search firms, and mentoring. The review has also been wise to avoid quotas, which would not have addressed the real issue of how we bring about a cultural change.”
Miles Templeman, director-general of the Institute of Directors (IoD), said he was pleased the report had stopped short of advocating gender quotas for the boardroom.
”However, we are concerned that Lord Davies continues to threaten gender quotas at a later date if ‘the recommended business-led approach does not achieve significant change’. This attitude is unhelpful. Gender quotas for boards should have been rejected once and for all as being incompatible with a meritocratic approach to senior level appointments. Furthermore, they would be demeaning and undermining for female directors and aspiring female directors.
”A greater diversity of people on boards in general is necessary, and this clearly means we need more female directors. The way to do this is to increase the pool of female senior executives from which directors can be recruited. Improving flexible working opportunities for aspiring female executives will be central, with companies rather than Government taking the lead in creating these opportunities.”
Ruth Spellman, chief executive of the Chartered Management Institute (CMI), said: ”The fact that the Government has commissioned this report at all demonstrates that they realise the vital contribution that women bring to the boardroom.
”We hope that the two years afforded by Lord Davies’ report will ensure that organisations do make the essential changes to widen diversity and allow women to take their place at the very top.
”In 1974, when sex discrimination was first outlawed, only 2% of the workforce was female and today this figure has swelled to 45%. Such growth may be seen as a revolution, but the truth is far closer to a snail-paced evolution as the figures for women in the boardroom lag far behind.
”While the onus is now on businesses to achieve these targets, there is still work needed from women to demonstrate their ability to be there and thrive in these positions. Last year the CMI launched the Ambitious Women’s Toolkit to encourage female managers to achieve equality and fight discrimination. With the average UK salary for a male manager currently standing at £10,071, more than that of a female manager, the next two years will be a very telling time.”