accocuntingcpd.net author Lisa Weaver, whose course on Corporate Governance launched this week, looks at the findings of the 'Gender Diversity Report' by the Financial Reporting Council.
by Lisa Weaver
In May 2011, the Financial Reporting Council issued the Consultation Document 'Gender diversity on boards'. The consultation centres on whether listed companies should be required to publish their policy on gender diversity and report against it annually.
Introducing the consultation document, FRC Chairman Baroness Hogg said: "Board diversity and effectiveness are closely linked. Diversity widens the perspectives brought to bear on decision-making, avoids too great a similarity of attitude and helps companies understand their customers and workforces. A board with too few women on it risks a weakness in at least one of these respects."
It is interesting that gender has become a matter specifically debated in terms of governance. Boards should have an appropriate balance of skills and experience, and board members, especially non-executive directors, should bring a fresh perspective to board discussions. Bearing in mind Baroness Hogg's comments, the 18 companies in the FTSE 100 who have no female board members share a potential weakness in terms of lacking different perspectives on matters discussed in the board room.
It is sensible that board members are chosen based on their skills, knowledge and experience. But when women are so under-represented in the board room, companies and their stakeholders are missing out, as they are unable to draw from the widest possible range of talent. This is not just a nice idea - studies have shown that female board representation brings financial benefit.
McKinsey’s 2007 report 'Women Matter' demonstrated that companies with a higher proportion of women in their top management outperformed other companies in respect of profitability, return on earnings and stock price growth.
According to a recent Department of Business Innovation and Skills report 'Women on Boards', at the current rate of change it will take until 2081 to achieve gender balance in the UK’s board rooms. Hopefully, revisions to the Corporate Governance Code will help gender balance to be reached sooner.
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