How to make your company more diverse - and keep investors happy

Institutional backers want more women at the top - here's how to keep them happy.

by Jack Torrance
Last Updated: 13 Oct 2016

There’s evidence that female founders are treated less favourably by venture capital investors than their male counterparts. Little wonder, then, that successful women tech entrepreneurs are still few and far between. But there’s fresh research suggest that institutional investors – including hedgies and wealth managers as well as VCs – are placing a greater emphasis on the importance of diversity; at least in terms of gender.

The report by Hermes Investment Management published last week showed that a touch over half of all those surveyed said they regarded gender diversity of senior management as an important element of good corporate governance. At 51% it’s a massive increase on the 25% recorded in last year’s survey – though on that could be skewed by the survey’s small sample size of 102 investors. It’s substantially higher than the 30% who said racial diversity was important and the 19% who said diversity of ‘socio-economic’ background matters.

Investors have good reason to worry about boardroom diversity. ‘Group think’ has been blamed for everything from the financial crisis to Tesco’s accounting scandal and firms who exclude the brains of half the world’s population from their top team are missing out on fresh perspectives. ‘Boards with more diverse composition tend to challenge senior management, be more innovative and make better decisions,’ said Hermes’ head of business development Harriet Steel. ‘These are febrile times and investors increasingly recognise that certain sorts of risk can fundamentally undermine the performance of their portfolios over time.’

Read more: How other start-ups can follow Etsy's lead on diversity 

Some progress has been made over the past five years or so. In March 2011, when Lord Davies set out to improve representation at the top, just 12.5% of FTSE 100 board directors were women; now it’s more than 25%. But that’s still well below where it ought to be, and there remain more than 10 companies in the FTSE 250 with no women on their board at all.

Here are five things every business should be doing to boost gender diversity:

1. Look further when recruiting. It’s not good enough to say ‘but all our applicants are men.’ Vary the job boards you use and try going direct to schools and universities to mentor young women into your industry.

2. Tackle cultural problems. All the equality policies and well-meaning recruitment programmes in the world aren’t enough to overcome macho workplace cultures. For some men it’s easy to assume we live in a post-sexism society but a remarkable 51% of women have suffered some kind of sexual harassment at work, with unwanted sexual jokes and advances being among the most common forms. Make it painfully clear what is unacceptable and stamp on any bad behavious as soon as it rears its ugly head. 

3. Combat unconscious bias. It’s not just out-and-out sexist dinosaurs that stand in the way of diversity; we’re all guilty of subconsciously discriminating from time to time. Train managers in dealing with their unconscious biases.

4. Identify rising stars. Companies often complain they would struggle to fill board quotas because their company doesn’t have enough female talent ‘in the pipeline’. Actively seek out the best women in your business and mentor them so they are ready to step up when a potential promotion comes up.

5. Get flexible. It’s not just women that would like more time to spend with their children but it’s clear that inflexible maternity and paternity policies have made it more difficult for some to get to the top. Ask your staff what works for them and consider equalising paternity and maternity leave to level the playing field. And make it easy for parents to fit their home life around work by offering flexible working options.


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