CORPORATE GOVERNANCE Gender on the Agenda – Boards and the sexual divide

Women make up nearly half New Zealand’s (paid) workforce. They also dominate tertiary graduation statistics. And, of course, they occupy several of the most influential jobs in the land. But they still face long slow climb to our top public company boardrooms. At this level, women currently hold about one in every 20 directorships.
This glacial shift in directorial parity is not, of course, unique to New Zealand. It is, however, the reason why some countries have chosen to apply some legal hurry up. When Sweden introduced policy mandating that publicly-listed companies increase the percentage of women board members from eight to 25 by 2004, the country’s deputy prime minister said otherwise the process would, at current speed, take 150 years for women to reach the 50 percent mark.
Neighbouring Norway opted for an even faster pace – setting 40 percent quota that companies must reach by July this year. Those companies which don’t meet quota will face legal action and fines.
This big-stick approach helps the numbers game. When quotas were mooted in 2003 the number of women on Norwegian boards was 7.3 percent. By last year they occupied 22 percent of board seats in the country’s major boardrooms, although they account for just nine percent of top management.
By providing mandatory push to the pace of women’s involvement in governance, these two countries have helped open up distinct North-South divide in the composition of European boards according to the London-based Financial Times. Women’s increasing status in the North contrasted starkly with Spain and Italy where boardrooms remain an “almost exclusively male” domain.
Germany and the United Kingdom hold the middle ground where women occupy about 10 percent of board seats. Women hold eight percent of directorships in Europe’s top 200 companies, which is higher than the five percent they hold in New Zealand’s publicly-listed (NZX) companies (source: NZ Census of Women’s Participation in Governance and Professional Life, 2004).
Here the representation divide is between the public and private sectors though newer companies listed on the NZAX are, with 16 percent of directorships held by women, playing catch up at faster rate.
And the number of women directors of Crown companies has reached 35 percent thanks to some affirmative action. Former Prime Minister Jenny Shipley got this particular ball rolling and her push to have gender and ethnic representation on goverment boards and committees broadly reflect this country’s demographic make up continues. The Ministry of Women’s Affairs operates Nominations Service that wants to boost women’s representation on these bodies to 50 percent by 2010.
So, should the private sector get mandatory hurry along?
Nicki Crauford, chief executive of New Zealand’s Institute of Directors, is against positive discrimination because, in part, it muddles the issue of genuine merit.
“Personally, and this is personal opinion because the IOD doesn’t have policy on this, I’m not in favour of any form of positive discrimination. You can end up putting people in roles where they’re seen as simply making up the numbers and are therefore not taken seriously. It then takes longer for those who are truly competent to be accepted and this is insulting to those who are genuinely capable.”
Crauford accepts that members of minority group often have to run harder to gain top level traction but, that’s preferable to getting perceived hand-up which leaves questionmark over their capability.
It could, however, be argued that some positive discrimination is necessary to counter the tendency of prevailing majority to favour its own kind. Boardroom homogeneity is not necessarily good thing. Recent studies from the United States, for instance, suggest that board diversity is linked to better company performance, higher levels of creativity and greater receptivity to change.
But addressing the gender lag by compulsion is obviously controversial.
The business sector in Norway initially greeted it as “preposterous” move. Even those standing to benefit most, the country’s female executives, weren’t dancing in the streets. Norway’s Association of International Professional and Business Women is still, apparently, split 50-50 over the issue.
Opponents of compulsion don’t like the idea of restricting private enterprise choices about who can best represent its interests at board level and are already worried about potential shortage of qualified candidates. They argue that artificially pumping up the number of female directors could water down the collective pool of wisdom and experience in the country’s corporate boardrooms.
Alison Patterson, who is New Zealand’s longest serving woman director of public company, believes the focus must be on getting the best person, regardless of gender. “If I invest in business, the person I want in charge of its stewardship is someone with record of success in that business,” she says.
Board members must have an understanding of the particular business, the industry sector in which it operates and, if it’s commercial enterprise, they must have record of business success. That narrows the field in terms of appropriate candidates, without having to worry about including specific minority groups. “I don’t think quotas are good idea. It detracts from what board is all about if you start to regulate what its makeup should be,” adds Patterson.
While not disputing the benefits of diversity in board membership, Nicki Crauford questions the basis for that “diversity”. “My second reason for disliking positive discrimination, particularly in governance, is that you want diversity of thinking, not necessarily diversity of gender or of skin colour.”
Just getting boards to look more diverse doesn’t necessarily put any new thinking in the mix.
And then there’s the issue of whether diversity should be gained at the expense of competence – particularly given potential shortage of qualified candidates.
Women are gaining more traction on career ladders, but the numbers that have made it into what could be called the potential director pool are still fairly limited. Women make up around 20 percent of IOD membership, but this doesn’t, it seems, equate with readiness for the role.
Ray Wilson, who runs IOD’s appointments service, believes companies would struggle to meet Norwegian-style quota. “If it was introduced here tomorrow, there would be shortage, and that is purely function of women reaching sufficient seniority to fit the bill. Across the vast number of professions that lead into directing, there is probably gender equity, but not at the top level.
“My perception is that there is not yet enough skilled women around at the moment, but there will be. On our books we don’t have lack of women aspiring to be directors.”
Patterson says we are lucky in New Zealand because the Government has committed to giving women opportunities and that positive discrimination for women in the public sector is giving many good start with governance experience. “I don’t think you can ask for more than that.”