Diversity 'must be next on agenda' for boardrooms

2004

Britain’s boardrooms have finally recognised they need to become more diverse – but now must face up to the challenge of making this a reality without diluting quality.

According to board performance experts, The Change Partnership, executives in the country’s top companies are keenly aware of the value of getting more women and high flyers from ethnic minorities into board-level positions.

But progress appears to be painfully slow. A study this week by financial consultancy Deloitte reported that, while 70 per cent of FTSE 350 companies had made changes to the composition of their boards in the past 12 months, there had been no increase in the number of female board directors.

The main drivers for change have been the need to meet the Higgs recommendations and new combined code on corporate governance, with gender equality as a result losing out.

Deloitte partner Rupert McNeil said: “Issues of gender balance have perhaps been less pressing than the need to address concerns about the independence of non-executive directors.”

Change Partnership director Peninah Thomson stressed both changes needed to go hand in hand.

"It is quite proper for companies to be focused on Higgs and governance. But effectiveness is not just a matter of making systems and processes better but also about people dynamics and diversity,” she told Management Issues.

Now firms had begun to get the structural issues right, diversity needed to be next on the agenda.

"I do not think companies are overlooking it, they are keenly aware of diversity; the argument has been won about the desirability of diversity. The argument now is about how to do it,” she added.

Promoting diversity and greater access without compromising on quality or suitability was likely to be a tricky balancing act, she conceded.

The Deloitte report pointed to the fact that just three per cent of executive directors and eight per cent of non-executive directors are women, with, post-Higgs, boards becoming smaller and having fewer executive directors.

But there were signs things are changing, stressed Deloitte’s McNeil. FTSE-350 firms were widening their recruitment pool for non-executive roles.

"We anticipate the number of female board members will increase over coming years,” he said.

Equal pay, the culture of organisations at the top and retention policies such as flexible working can often be factors in whether top-flight women stay or move on, argued Thomson.

The Change Partnership is currently scrutinising what makes a good chairman - research which will also examine gender issues - among FTSE-250 companies, and is expected to publish its findings later this autumn.

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