Let companies set their own quotas for female directors, says CBI

The CBI reckons it has come up with a better option than external quotas. But would legal sanctions be more effective than naming and shaming?

by Emma Haslett
Last Updated: 15 Dec 2010
It’s a perennial debate which has, so far, failed to yield an answer: how do you get more women onto boards without introducing unfairness? But now the CBI thinks it has come up with the solution: naming and shaming. Well, sort of. The business organisation says that instead of the Government imposing arbitrary quotas, businesses should be allowed to come up with their own quotas for the number of women on their boards - and then be forced to explain themselves publicly if they don't comply. But is that a sufficiently strong incentive to bring about change?

The CBI's approach would take into account the percentage of women in a company. So, for example, a media business with lots of women would have a higher female director quota than, say, an engineering company where women are few and far between. And the clever bit is, because the businesses concerned come up with their own quotas, they can't blame anyone else if they fail to meet them. But there's one possible flaw in this plan: viz,. what happens if they don’t comply. They'll have to say they're very, very sorry, is the CBI's best suggestion.  

The women/ boardrooms issue has cropped up a lot recently. In fact, former Standard Chartered chairman Lord Davies is currently writing a(nother) report on the issue. But something needs to change, judging by the results of a recent report by Cranfield School of Management: this showed that of the 1,076 FTSE 100 directorships, just 135 are held by women. That’s a meagre 12.5% (up from 2009’s 12.2% and 2008’s 12% - but not by much).

CBI president Helen Alexander is four-square behind the idea, pointing out that it gives companies the chance to push up the number of women on boards without ‘quotas, ratios or tokenism’. So it may be the sort of compromise Lord Davies is looking for – many think external quotas are unfair (not to mention adding extra red tape when the Government is supposed to be cutting it down). And in Australia, where a similar scheme will come into effect next year, there has apparently been a ‘sharp rise’ in the number of women on boards. So that’s good.

As Lord Davies points out, any new policy has more chance of success if everyone agrees on it, including ‘British businesses and their shareholders, the Government and the headhunting profession’. And the benefit of this approach is that it's hard for companies to object, since they're effectively setting their own rules. But the question is: will it be enough? Will firms set suitably ambitious targets? And will the threat of having to explain themselves publicly be enough to encourage compliance? Some will argue that amending the law will bring about change much more quickly...

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