More women in the boardroom makes business sense

Why is it that the words “quotas” and “women” uttered in the same breath prompt a collective muttering about “fairness” and “merit” as if these ideas can never go together?

This was the case when Maria Miller MP, Culture Secretary, opposed recent EU moves for legislation to address the shameful lack of women in our boardrooms. Currently just under seven per cent of all executive directors in the FTSE top 100 are women. I agree we don’t need EU laws to put this right but for very different reasons to Ms Eagle.

EU commissioner Viviane Reding calls for boards across Europe to have at least 40 per cent of their seats filled by women. Although she’s met opposition, a redraft of the laws is likely to return, pushing forward compulsory quotas of women at board level. But mutter ye not!

Quotas are unwelcome if they bring something negative. What if they bring not only a fairer society but better business and a more successful economy? How about making the difference between success and bankruptcy? A study by Leeds University Business School suggests that having just “one female director appears to cut a company’s chances of going bust by about 20 per cent”. That’s according to Nick Wilson, Professor of Credit Management at LUBS, who looked at 17,000 companies that were wound up in 2008.

There is evidence from other studies which show companies with a higher share of women at top levels deliver stronger financial performance. A report by McKinsey & Company says companies with the most gender-diverse management teams had 17 percentage-point higher stock price growth between compared to the industry average. Women directors helped raise average operating profit to almost double the average between 2003 and 2005.

So why aren’t Europe’s boardrooms echoing to the stampede of high heels? Well, they are starting to and for once the UK could make sure it isn’t the last to take action.

Norway kick-started the revolution back in 2002. Trade and Industry minister Ansgar Gabrielsen (a man) was frustrated that out of Norway’s publicly listed companies only six per cent had female directors. Just eight years later, after radical intervention that figure was a staggering 40 per cent. When Norway brought in compulsory quotas there were dire warnings about a stock market crash and a shortage of women who were suitably qualified. Some women too feared intervention would devalue their professionalism and they’d be seen as “token” directors. Once the law was passed even the most conservative business groups got behind it and organised leadership training. Guess what? They quickly found 600 talented women who were board material.

Norway achieved progress that would have taken 100 years without intervention. Business leaders there agree that if the law were repealed today the policy would continue voluntarily. Merit and fairness need a helping hand.

The European governing body for football, UEFA, realised last year that 16 mostly white, male directors did not represent the burgeoning interest in the sport amongst women. They invited the talented and plain speaking Karen Espelund (another Norwegian) to join the executive committee.

One woman on a board of 16 is hardly a quota but when asked if she felt awkward, Espelund retorted that actually men must have been on quotas in football for the last 150 years to be so overrepresented; her appointment (now to the full board) was just a step towards redress.

Maria Miller is right. We don’t need EU laws to force quotas for women on us. We should see for ourselves it’s time for a voluntary boardroom reshuffle. We need the most talented, the most innovative, the greatest creators of wealth to lead our economy. We have a scandalously underused UK natural resource – our women – waiting too long for the opportunity. We can boost sales, raise profits and not because the EU tells us to, but because it’s good business sense.

The only people with anything 
to fear from quotas are the mediocre who are sitting in the boardroom, not on merit or through fairness but because 
they are men. Maybe they will 
feel like turkeys voting for Christmas. But if they don’t it could be their companies and their shareholders who are most likely to be stuffed.

Barbara Govan is CEO of Leeds-based TV production, video and training company Screenhouse Productions Ltd and Chair of the Staithes Arts and Heritage Festival.