Financial firms to set targets for female NEDs

The vexed issue of Non Executive Director gender equality continues to tax the mind, with the latest news that most big financial firms will have to set a target for the number of women on their board of directors from 2014, as part of a binding European Union Directive. As well as setting a target, big banks, building societies and investment firms will also have to explain how they are going to meet their goal.

The argument ‘for’ quotas is powerful, of course. In April, a report from Cranfield University showed women held just 17% of the board positions among the companies listed on the FTSE 100. Of those firms, Burberry has the highest proportion of female directors on its board with three out of eight. It is also the only FTSE 100 company to have two female executive directors – chief executive Angela Ahrendts and chief financial officer Carol Fairweather.

So exceptional is Burberry to the general rule, it’s understandable why the ‘pro-quota’ group enjoy so much vocal support. Not least because the new rules came to light after the two UK agencies that regulate the financial services industry, the Prudential Regulation Authority and the Financial Conduct Authority published consultation papers on the European Union’s Capital Requirements Directive IV.

But here at The Non Exec Hub, we believe that quotas will only make it more difficult for female directors in the longer term. Firstly, there’s the obvious inference that “she only got the job because of the X chromosome, not because she’s the right person for the job”. And that’s a hard one to defend.

Secondly, the mechanics of implementing well-meaning legislation usually hides some devil in the detail. For example, part of the directive looks at how company boards are composed. It says that 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.” How do we agree a ‘target’.

In effect, it’s the first time that a regulatory requirement to set gender targets for senior management teams has been imposed on UK businesses. That is a major sea-change that will affect the very fabric of financial institutions. Given the important of corporate governance, especially in the financial sector, It needs to be done carefully, measurably and responsibly – and that will take time. So we agree with Helena Morrissey, the founder of the Thirty Per Cent Club, who believes the new regulation is not necessary.

“The UK is already making strong progress and to some extent any regulatory measures emanating from EU might seem academic as large banks already have stated targets.

Our belief is that, as more women join boards without the imposition of quotas, the more they can demonstrate the value they can add. By the time we get to 30%, the system will be self-perpetuating,”

believes Helena.

We concur. With two strong caveats. There’s certainly no room for complacency – the tide has changed but it’s possible it could turn again. Secondly – and more practically – the Lord Davies Report has done its job in placing Board Level gender equality firmly in the mainstream of UK business life. Now it’s the job of both female Non Executive Directors and potential employers to make it happen.

That means employers need to identify what they want from NEDs – and how best to attract the right skillset and mindset. And it means potential candidates need to:

• fully develop their networking skills
•  critically assess their skillsets  – and address any gaps
• If appropriate, enlist the help of a mentor
• Crucially, find out where the right roles for them really are.

We know the above from our own experience of helping NEDs and employers. It’s not about any further legislation – it’s about making it work.  Perhaps more importantly, what do you think?

Heather White is CEO of The Non Exec Hub ([email protected])