Blog : BOARD TALK
|Posted on August 12, 2013 at 5:20 AM|
So it has happened. On a sleepy Monday in August, BBC News was the only media outlet with the story - most big financial firms will have to set a target for the number of women on their board of directors from 2014. They will also have to say just how they are going to do it. That should wake everyone up.
The binding European Union directive has been revealed in consultation papers on the broader 'European Capital Requirements Directive IV' published by two UK financial services regulators - the Prudential Regulation Authority and the Financial Conduct Authority. Part of that looks at the composition of plc boards.
According to the BBC story, large financial firms will have to establish a nomination committee which will help select the board of directors and decide on a "target for the representation of the underrepresented gender on the management body and how to meet it."
Nominations committees of course already exist. In Norway (the first European country to establish gender quotas) they are separate from the main board, which is interesting - and is one way of ensuring some objective distance when calculating what is needed on the board- but they can also be criticised as being disconnected from the strategic needs of the business.
It is unclear whether such a 'separate' nominations committee is being mandated by the EU.
Senior business figures to whom I spoke recently did not rule out such an idea as a means for change, but pointed out that much of Norway's business is state-owned - and the logistics in the UK of establishing separate nominations committees for plc boards could be complicated.
Those conversations did reveal widespread acceptance that it is time to think a lot more boldly about how to bring about change in plc board composition - as a business imperative, for competitive advantage. There is a real and acute need for more representation by background and thinking, by social and economic class as well as gender, and a lot less groupthink.
Here are some of the findings of UK Parliamentary Commission on Banking Standards led by Andrew Tyrie, MP, in his own words.
No, he doesn't mention gender, at least not here. But on corporate governance he says:
"Banks whose board-level governance arrangements ticked all of the regulatory boxes and appeared capable of exercising effective control and oversight proved woefully inadequate." (my emphasis). In other words, they probably had the wrong people on board.
The system has to change. There is clear evidence from the Tyrie report that nomination committees have blocked candidates who might 'challenge' rather than 'support' - so I am told by the very top of corporate governance regulation in this country. So financial services - with all the risk that still hangs around it like a bad smell - is the obvious place to start for change. It is also the most male-dominated.
Boardroom recruitment has not changed in the UK for a very long time - too long. There are lots of rituals we do so very well - and I confess to having a weakness for many of them, some of which is nostalgia and a love of old stone buildings and pomp and circumstance .....but times change, and we must change with them. Sticking to rituals when it comes to recruitment is just plain idiotic. As long as the process does not change, neither will that longlist.
No one really believes there aren't enough 'qualified people' to be non-executive directors. I can tell you that because I have done some extensive research on it recently. The way we look - and what we look for - needs to change, and it won't happen from the top of business without a lot more delay.
We have talked about women on boards in this country for over two years ad nauseum, but we somehow never manage to talk about headhunters - their real role, or the lack of it, and their ties to the chairmen who keep them repeatedly in place for their boardroom recruitment.
Since the start of this debate I have been against quotas for all the usual reasons. But I think this EU consultation is inspired, and has perfect timing.
I should also credit The Scotsman for being quick with a story to follow the BBC. Also interesting in terms of the EU. Scottish government spokesman: “There is no doubt that there is a need to increase the diversity and gender balance of the boards of institutions in both the public and private sectors across Scotland and we will await the outcome of the current consultation with interest.”
It is time to look far more boldly at recruitment for plc boards, and what better place to start than financial services ? We all have so much to lose otherwise.