INVESTING IN WOMEN ON BOARDS

A worrying study by Hermes Investment Management, Responsible Capitalism and Diversity, has found that despite some inroads into gender equality in the FTSE 100, women are still underpaid and under-promoted in comparison with their male peers.

In 2011, the government set a target to have 25% female board members in all FTSE 100 companies by 2016. On the surface, the scheme appears to be working, increasing female board membership from 12.5% in 2011 to 23.5% in March 2015. Better still, data from October 2015 shows that women now occupy 31% of seats on the boards of the UK’s biggest banks.

However, the Hermes report suggested that when you scratch the surface, female board appointments have had little impact on improving the lot of women more broadly in these organisations. Their results suggested that, in contrast to the noticeable increase of female board appointments, female senior executive appointments have increased from 5.5% to just 8.1%. They also found that even at senior levels, women were on average being paid less than their male counterparts. It could be that it is too soon to see the trickle-down benefits from greater female representation on boards, which arguably could take some time to manifest, but progress appears to be slow nonetheless.

The Hermes report suggests that the culprit could be investor attitudes. Disappointingly, only 23% of institutional investors thought that female board membership was important.Yet, as the paper (which is well worth a read) points out, there is clear evidence that a more diverse board can help make companies more efficient and more prudent.

Whilst the aim to have 25% of FTSE board members being female by next year is laudable, if it is doing little to improve women’s roles elsewhere, its value will clearly be limited. Companies will pay particular attention to what their investors think and investors will always have an eye on value. More commentary and studies on the balance sheet benefits of having women on boards and senior positions could well prove invaluable evidence. Happily, the increased figures at least provide a larger study group to work from.

Rolleen McDonnell is a solicitor at senior executive employment law firm BDBF.

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