Expert insights from Aileen O’Toole CDir, Chartered Director and Co-Founder of WomanUp, a training and advisory consultancy whose mission is to expand the number of women in the female talent pipeline.
It is essential that boards use their influence to promote a diverse and inclusive culture. This should be cognisant of all areas of diversity, such as, to name but a few, racial, religious, socio-economic/class, education, disability, age, and sexual orientation. This blog focuses specially on one of these key areas - gender diversity.
The question of how boards consider gender diversity has tended to have a narrow lens – focusing on the proportion of women at board level.While that is important, and significant progress has been made, it does not encompass the full spectrum of what a board needs to consider in order to ensure their organisations are gender diverse and equitable.
The S in the ESG
There are multiple reasons why this should be a hot topic for boards. Environmental, social and governance (ESG) principles are guiding more investment decisions and gender diversity is core to ESG’s social pillar. Investors, activist shareholders, customers, employees and potential employees are keen to understand how women are represented not only on the board, but at executive level.
Investment funds have been launched that invest only in gender diverse businesses, not through altruism but because of the expectation of better financial returns. There is much evidence from Catalyst and other sources to support the notion that a company which is gender diverse – and more broadly is committed to all aspects of diversity and inclusion (D&I) – performs better and not just financially. There are also positive benefits in relation to productivity, creativity and attracting and retaining talent.
Another factor is gender pay reporting which comes into effect this year for organisations employing more than 250. This gap is defined as the differential between the average pay of males and females within an organisation and it is estimated the average gap is currently 14%, according to Chartered Institute of Personnel and Development (CIPD), the professional body for HR and people development.
Next year, returns for individual companies, sectors and regions will be available online. A similar system in the UK, which allows comparisons to be made between individual companies and sectors, has led to much scrutiny of individual businesses and sectors by the media and other similar parties. Gender pay reporting has potential reputational consequences for businesses.
Generally, more data about gender diversity is in the public domain. Balance for Better Business, the independent group established by Government to improve gender balance in senior leadership roles and on boards, has had a primary focus initially on the board composition of quoted companies. Its latest report shows progress on the achievement of targets with 55% of ISEQ20 meeting the target of 30% representation
Balance for Better Business reports that increasing female representation in the important roles of Chairs, CEOs and CFOs “continues to be slow.” It intends to gather and analyse more data on female representation at executive level.
It is highly likely that the data will mirror the trends globally that there is a weak female leadership talent pipeline, specifically that women are under-represented at middle management and senior management levels. There is also some evidence that COVID-19 has reversed some of the progress, with women choosing to leave the workforce and which has been described by US Vice President Kamala Harris as a “national emergency.”
There are multi-faceted reasons why the pipeline is weak. Corporate culture is cited as a top reason, with many organisations not adapting to the fact that there are more women in the workforce. “We’re sending our daughters into workplaces designed for our Dads,” philanthropist Melinda Gates stated.
Other factors at play include unconscious bias, gender stereotyping and the reality that women carry the bulk of household, childcare and elder care responsibilities. Progressive companies are addressing these barriers, because they see the benefits of better gender diversity.
Gender diversity should be a board matter because of its importance to company performance, reputation and attracting and retaining talent. Here are five suggestions for the board’s role.
- Ensure that the board itself is gender balanced while taking account of the need to have core competencies represented. Boards need to be conscious that that there is a legal imperative coming down the line, with an EU directive obliging companies to have 40% non-executive board composition on the part of the under-represented sex, mainly women, by 2026.
- Make gender diversity an agenda item as this will mean that progress is monitored, and actions will be taken at executive level.
- Seek data to track gender balance at every step of the leadership ladder and set KPIs.
- Take ownership of the narrative, by sharing the board’s intent and data internally and, in the case of listed companies, communicating what the company is doing to achieve gender balance in its annual report.
- Encourage directors and senior executives to act as sponsors to support high-potential women and use their influence to identify opportunities for them.