Women in leadership – your key to a better business?

The past year has seen influential women making an impact across the globe. As Kamala Harris was elected the first female US Vice-President, Chloe Zhao became the first woman of colour to be voted Best Director at the Oscars. And as New Zealand’s Jacinda Ardern won international praise for her handling of the pandemic, Sarah Gilbert and Catherine Green delivered AstraZeneca’s Covid-19 vaccine in record time, earning the gratitude of millions.

It has been good news for women in business too, according to the government-backed Hampton-Alexander Review of FTSE women leaders. Its final report in February 2021 showed that it had achieved its target of 33% of board positions at FTSE 100 and FTSE 250 firms being held by women by the end of 2020:

• More women than ever are serving on the boards of the UK’s biggest public companies with female representation on FTSE 100 boards exceeding the 2020 target at 36.2%
• 220 of the 350 companies in the FTSE 100, FTSE 250 and FTSE 350 have reached the target of women holding 33% of board positions, rising from just 53 companies in 2015
• More than a third – 34.3% – of FTSE 350 board positions are held by women, an increase of more than 50% over the past five years
• There are no longer any all-male boards in the FTSE 350.

Some well-known names have even exceeded the targets, including drinks company Diageo, and Severn Trent water company. Both have more women than men on their board – a first for the leading FTSE 100 index. When you see the progress in chart form it looks impressive – the movement is all in the right direction, with the implication being that if we just keep going, gender parity in the boardroom can’t be far off.

But it’s not all good news…

Yes, you knew there was a ‘but’ coming. The successes, great as they are, mask some underlying issues that are not only a setback for women, but should also make shareholders sit up and take notice.

Firstly, despite the successes on board representation, there are just 5 female CEOs in the FTSE 100:

• Emma Walmsley, GlaxoSmithKline
• Liv Garfield, Severn Trent
• Carolyn McCall, ITV
• Allison Brittain, Whitbread Group
• Alison Rose, RBS Group

It seems executive hopefuls called Alison can at least take heart, but for the rest, there’s more hope for our grandchildren than for us – 5% is an underwhelming statistic, and at the current rate it will take more than 80 years before women achieve equality at CEO level.

Secondly, when we start looking past the FTSE 350, the progress is even slower. Women on the Board UK surveyed the 261 All-Share firms just below the FTSE 350 finding that:

• under 50% have met the target for 33% women on boards;
• more than 50% have an all-male executive leadership team;
• just 16% have any ethnic diversity on their boards;
• and 37% have only one or no female board members.

They also identified a gaping diversity divide – while some businesses are taking steps to improve, in more than half female representation at board level was very low or non-existent. In short, it seems the talent pipeline isn’t working. Which is worrying, because if we want women leaders in our top businesses, they need to build and hone their skills somewhere.

Mind the gender pay gap

“Is Wonder Woman still worth less than Superman?” poses Ann Francke, Chief Executive of the Chartered Management Institute. “The answer, sadly, is yes.” Gender pay gap issues are alive and kicking at board level just as they are throughout the workforce.

On average, female FTSE 100 CEOs earn 16.66% less than their male counterparts. The highest paid male CEO earns almost 90% more than the highest paid female. The gap is actually worse in the FTSE All-Share than the national average, and highest of all in the FTSE 350.

Research by law firm Fox & Partners pinpoints UK sectors with the worst gender pay gap as construction, finance, insurance services and education. Female directors at the UK’s largest financial services firms, for instance, are paid on average two-thirds less than their male colleagues. According to the World Economic Forum’s Global Gender Gap Report, it will be a staggering 170 years until women achieve parity on a global scale.

Signs of a growing apathy?

Equally concerning is the thought that people no longer see the problem and many think it’s already fixed. “Progress on board diversity has been painfully slow,” observes Women on Boards UK CEO, Fiona Hathorn, “yet, recently, there has been a creeping sense that what has been achieved is ‘enough’ and no more effort is needed.”

It is concerning that recent research shows that young people, and particularly young males aged 18-34 in G7 countries, are less likely to support women in leadership roles, a trend evident even in Germany under Merkel’s steady leadership.*

Why it matters, whatever your gender

At this point there are two questions that loom large. Why does women in leadership matter? And what can be done?

The most obvious answer to the first question – that of fairness and equal opportunities for all – is a good one, but perhaps not the one that will finally lead to significant lasting change. The answer that should have us all rooting for change is that businesses and bottom lines improve when they include female leadership.

Women bring different skills, perspectives and ideas to any role, and that should lead to better decision-making in any business. Women are seen as more honest, creative, compassionate and outgoing. They are strong communicators, exhibiting both IQ and EQ, and likely to show transformational leadership, helping to change people’s attitudes and outlook. They also control most of the world’s spending (up to 80% in the US), so having people at all levels of your business who identify with the female economy is undoubtedly an advantage.

Research shows that companies with greater gender diversity, in their workforce and senior leadership, are significantly more profitable than those without – profits and share performance can be close to 50 percent higher when women are well represented at the top.† If women in leadership are good for business, then everyone should be onside.

Targets and transparency

What can be done is a harder question to answer and yet we know some of the answers already, particularly in the light of COVID-19. At ground level, making flexible working arrangements the norm, providing childcare support and parental leave is essential. As employers, listening to employees and helping them to build supportive networks of role models and mentors is also valuable.

While target setting is viewed with reticence elsewhere in the world, the Hampton-Alexander Review reports that the voluntary target setting championed in the UK has worked well. The Female FTSE Board Report 2020 suggests that if used, targets should be ambitious – bold targets can mobilise organisations into action, even when they are not fully met. They should also be accountable – creating scrutiny and showing up bias across key talent management processes.

At Severn Trent, their successful target setting has been backed up by key actions to ensure diversity across the company, including only engaging executive search firms who are signed up to the Voluntary Code of Conduct on gender and BAME diversity and best practice, and considering candidates for Non-Executive Director Board appointments from a wide pool, including those with no listed company Board level experience. At Diageo the programme for gender equality is deep-rooted and widespread. As well as ensuring their graduate and mid-career development programmes have an equal intake of women and men, they also champion gender equality through their brands and advertising.

Targets must be backed by solid action according to Catriona Watt, a partner at Fox & Partners. “To see long-term change, firms must be committed to taking steps that will lead to more women progressing through the ranks, getting into senior executive positions and closing the pay gap.”

The Steering Group of the Hampton-Alexander Review are the first to recognise that there is more to do. Here’s just a small part of the report summary:

“Diversity is now recognised, in its own right, as a benefit to board effectiveness… Although targets for Board representation have been met, we have fallen short on representation in Executive Committees and Direct Reports. So the job is not done… until we can say that unconscious bias is no longer an impediment to the development of women leaders and that all leadership teams reflect and utilise all of the talent available.”

Over to us then.

*Reykjavik Index

† Sundiatu Dixon-Fyle, Kevin Dolan, Vivian Hunt, and Sara Prince, “Diversity wins: How inclusion matters,” May 19, 2020.

** Kellog School of Management at Northwestern University