Analysis

Untapped treasures: women on boards

Governance | Vibeka Mair | 28 Apr 2011

Women are still starkly under-represented on trustee boards and many charities are punching below their weight as a result. Vibeka Mair reports.

Earlier this year, the government warned Britain’s biggest companies that women had to fill more seats on their boards if they wanted to maintain their competitive edge.

The warning is made in Women on Boards, a report which suggests an ideological shift in government’s attitude towards gender diversity in business, away from rhetoric around fairness, to an emphasis on profit. Business secretary Vince Cable commissioned former Labour trade minister Lord Davies of Abersoch to produce the report, which investigates why so few women reach the top echelons of FTSE100 companies.

In his executive summary, Lord Davies says there is a “clear business case” for increasing the number of women on corporate boards:

“Evidence suggests that companies with a strong female representation at board and topmanagement levels perform better than those without and that genderdiverse boards have a positive impact on performance.”

He continues: “The importance of improving the gender balance of corporate boards is increasingly recognised across the world. Some countries, including France and Italy, are considering significant action and some, including Norway, Spain, Australia, have made significant steps already.”

The following analysis by Charity Finance compares Women on Boards’ research on FTSE100 companies with the picture in the Charity 100 Index. We explore whether the largest charities in the UK are leading on the current global trend to improve the gender balance on boards.

Better performance

Women on Boards concludes that corporate boards perform better when there is both a strong female and male presence. It cites a number of studies in this area. Women Matter, an annual report from the international management consultancy McKinsey, says research shows that strong stock-market growth among companies is most likely to occur where there is a higher proportion of women in senior management.

And The Bottom Line, written by Catalyst, an international membership organisation for women in business, found that companies with more women on their boards outperformed their male-dominated rivals, with 42 per cent higher sales and 53 per cent higher return on equity.

However, despite growing evidence that more women, and generally a more diverse board, achieves better performance results, in 2010 women made up only 12.5 per cent of the members of the boards of FTSE100 companies.

Cranfield University’s FTSE 100 Board Report 2010, which is supported by equalities minister Theresa May, finds the percentage of women on FTSE100 boards has been rising slowly over the past three years, from 11.7 per cent in 2008 to 12.5 per cent in 2010. In the voluntary sector, our research shows the picture is vastly better than amongst leading companies. Women make up 31 per cent of members overall on trustee boards at the largest 100 charities in the UK (see Women on charity boards table).

Coincidentally, international reports say a qualitative shift will take place when women exceed a proportion of about 30 percent in an organisation overall.

Academics call this figure ‘critical mass’, a concept borrowed from nuclear physics, where it refers to the quantity of matter needed to start a chain reaction, an irreversible takeoff into a new situation or process.

UK target

The majority of Charity 100 Index charities exceed the minimum 25 per cent target for female representation at board level recommended by Women on Boards.

Lord Davies expects all FTSE100 boards to aim for a minimum of 25 per cent female representation by 2015, and wants all chief executives to review the percentage of women they aim to have on their executive committees in 2013.

However, while the top 100 charities meet Lord Davies’ target collectively, 27 of them miss the mark, with less than 25 per cent female trustees (see Women on charity boards table).

Six charities in the Charity 100 Index have no females on their board, and it is noteworthy that, amongst this group, four are religious organisations – and one is the Football Foundation.

These six charities also all have a male chief executive.

In the private sector, 21 per cent of FTSE100 companies have no female directors at all, either executive or non-executive, according to Cranfield’s report.

Global trend

The UK is one of many countries currently actively working to improve gender diversity on corporate boards.

For example, Norway, Spain and Iceland have all set mandatory targets of 40 per cent female representation on corporate boards and France has passed a bill applying a 40 per cent quota for female directors by 2016.

Our research found 24 per cent of Charity 100 Index boards have at least 40 per cent female representation (see Women on charity boards table). However, while female representation at trustee board level is healthy among this group, men still dominate the top positions. Some 63 per cent of the charities with more than 40 per cent of women on their board still have both a male chair and a male chief executive, while only 17 per cent have both a female chair and female chief executive.

Conversely, no female chairs and CEOs lead the charities which did not meet Lord Davies’ 25 per cent voluntary quota. In this group, 89 per cent had both a male chair and chief executive, while 11 per cent had mixed genders.

Further, in the Trustee Top 100 Survey 2010 conducted by our sister-title Governance magazine, only 12 per cent of chairs in the top 100 charities were female.

Clore Social Leadership fellow Rowena Lewis says she has recognised a theme of women being under-represented at trustee-board level in her research on women’s progression into leadership in the voluntary sector.

“Women are well represented in the voluntary sector. They make up 68 per cent of the workforce. But they are not getting to the top roles. In the largest 100 charities only 12 per cent of chairs are female. I would argue there is still much action that needs to be taken.”

Indeed, according to the Charity Commission, around 45 per cent of trustees at all registered charities are female.

So, while 31 per cent female representation on top-100 charity boards is progressive compared to the FTSE100, when compared with the whole UK charity sector it falls short.

Lindsay Driscoll, a trustee and a consultant in charity law and governance both in this country and internationally, suggests this could be because larger charities mirror experience in FTSE100 boards.

“Traditional charities are closer to the FTSE100 in corporate governance, than smaller charities,” she says.

Governance methods

Tesse Akpeki, lead consultant for governance development programme OnBoard, has found that the governance methods of some charities can stifle diversity. “I’ve found many boards that are very proactive on gender diversity, but others still aren’t,” she says.

“I worked with a big national household name on their board governance. The chief executive wanted to encourage people who were from different backgrounds for board membership. But the board selects members and he was finding that they kept on selecting people they knew and were comfortable with.”

Stonewall had a similar problem on its board in 2003. It changed its governance methods and went from having eight out of 12 trustees all living in Islington to having half of its trustees being female, 20 per cent with disabilities and 20 per cent from ethnic minorities.

A report on how it achieved this was featured in The State of UK Charity Boards from the Institute for Philanthropy.

The report notes that Ben Summerskill, chief executive of Stonewall, made the change during a period of profound difficulty for the organisation. “When I arrived, the charity was on the brink of insolvency and suffering from very poor senior management. It was very clear to everyone that things had to change, and quickly.”

This need for change extended to the board itself, which quickly began to address how it went about recruiting new members. “I recall showing some of the board a map with the home addresses of trustees marked on it. Eight or nine out of 12 of them were within an inch of each other in Islington. I think it illustrated that we needed to approach the idea of recruitment in a different way.

“After conducting a governance review, the board now uses a skills audit which helps inform competencies needed when recruiting new trustees. The board also looks for people from a wide range of backgrounds. We believe that a diverse trustee board is probably more effective than one that is monochrome.

“Now half of the successful board recruits in recent years are people that had no interaction with Stonewall beforehand. They’ve brought talents to Stonewall that we would not have come across had we not advertised openly.”

Untapped treasures

These are difficult times for charities, many of which are operating in an increasingly complex environment, often with less money.

There’s a growing body of evidence to demonstrate that including more women on boards can improve organisational effectiveness.

On average, the largest 100 charities have a healthy number of females on their boards, achieving the ‘optimum’ 30 per cent mark lauded by academics and the UK business world, who have created the 30% Club to encourage more women onto corporate boards.

However, research by Lynda Gratton, professor of management at London Business School and an authority on how organisational structures and cultures will evolve, indicates that the best boards have a 50/50 mix of male and female members.

“In the past there has been a view that it takes a 30 per cent women-to-men ratio to make a difference,” she says. “However, we found that the optimal gender mix was about 50 per cent men and 50 per cent women. This shows that equal gender representation can help to unlock the innovative potential of teams.”

As charities look at different ways to tread the rocky road ahead, a focus on the gender balance of trustees could reap hidden rewards and help maximise the potential of your board. 

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