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Are female quotas on boards inevitable?

The quota chestnut has been cracked open again but the business community is adamant forcing boards to appoint a set number of women as directors is not ideal.

The government said last week it will ensure half of all directors on state sector boards and committees are women by 2021, compared with 46% at the end of 2017.

The statistics are far worse for the private sector. In 2017, 81% of NZX-listed company directors were men and just 19% women.

Minister for Women Julie Anne Genter has suggested if these figures don’t improve, the government might need to think about ways to incentivise them.

“The reason there is no diversity on boards is because we haven’t actively sought to overturn the status quo, which is the result of historic discrimination and bias and unconscious bias. So we just have to make an active effort to find those talented people. And through attrition, it can happen. You can replace people,” she told TVNZ’s Q+A programme on Sunday.

A quota could be one tool to do this, although only if it did not have “perverse consequences,” Ms Genter said.

Quotas have been bandied around before, and generally receive a negative response from business.

BusinessNZ chief executive Kirk Hope says his organisation would not favour compulsion to get a higher representation of women on boards. 

“We’d prefer to see changes made voluntarily – hopefully the benefits of better decision-making resulting from more women on boards will encourage more companies to voluntarily make the change.”

Initiatives such as the Future Directors scheme, where young executives sit on a board for 12-18 months, the Institute of Directors’ Mentoring for Diversity programme and the Global Women network have all had some impact. But change on boards is glacial.

Quotas may be inevitable
One of New Zealand’s most experienced directors, Joan Withers, says if the percentage of women on boards doesn’t increase soon, a quota may be the only option.

“The problem for New Zealand is unless we start to get momentum on these statistics, then future governments may well look at quotas as the only way to drive this forward. And that’s not a good thing.

“The risk is, a woman appointed to fill a quota will be deemed by male directors around the table as just there to get the numbers. Whereas all the women I’ve worked with on boards over the years, my god, they are superb directors. They are really top class and add so much value, and their male colleagues regard them as an integral part of the board.”

Mrs Withers says there is no excuse for a company not to have at least one woman on their board.

Earlier this year, Mrs Withers and Global Women directors Vanessa Stoddart and Michele Embling sent out a “gently worded, supportive letter” to 29 companies which had no women on the board, offering assistance with connections.

“Most were positive and grateful for the practical assistance. But there were one or two that took it in a way that was less constructive.

“There’s a dogged attitude that’s very hard to shift. There are still small pockets of those dinosaurs existing in the New Zealand corporate community.”

Despite this, there is no shortage of skilled women and companies which want to match with them, and executive search firms could do a better job connecting the two, she says.

Des Hunt, who created the Future Directors programme in 2013 with Sir Stephen Tindall and Michael Stiassny, says about 70% of appointments to the programme have been women.

“So there is no excuse talent isn’t available.”

But unless progress is made, a government might bring quotas in, he says.

“Quotas should be the last resort but I trust they are not required.”

Some companies recognise they need to change their board make-up. Fast-growing Pushpay Holdings is one of those that doesn’t have a single woman on its board.

Chief executive Chris Heaslip acknowledges diverse boards mean better-performing companies.

“We absolutely are pushing for diversity, and we recognise that’s not a great position to be in … We recognise there is some work to be done there and we’re actively seeking to address that.”

Diversity pays
McKinsey research shows companies in the top quartile for gender diversity are 21% more likely to have financial returns above their respective national industry medians, and those with racial and ethnic diversity are 33% more likely.

The NZX’s new Corporate Governance Code recommends companies have a policy that sets out objectives to achieve diversity and report annually how these goals are being met.

The Institute of Directors encourages private company boards to set targets to between 30-50% of women.

“It’s an ongoing discussion about how to move the dial,” IoD Governance Leadership Centre manager Felicity Caird says.

“Quotas aren’t generally popular because it’s really about a culture change. There are a lot of leading companies out there which have thought about that cultural change within their boards and organisations. Those champions are trying to lead the way.

 “We believe change can be made and programmes out there are making some progress. But it is slow progress, you can’t deny that.”

She says the IoD remains “hopeful rather than confident” that change will happen soon.

Britain’s Department for Business, Energy Industrial Strategy released a report in April of the excuses FTSE 350 companies have given for the lack of diversity on their boards.

These ranged from “I don’t think women fit comfortably into the board environment” to “most women don’t want the hassle or pressure of sitting on a board” and “all the ‘good’ women have already been snapped up.”

Britain’s Business Minister Andrew Griffiths described these excuses as “pitiful and patronising.”

The percentage of board members of FTSE 350 companies increased from 12.5% in 2011 to 27.7% in 2017 and only 28% of them have women making up at least a third of their directors – Britain is aiming for all FTSE 350 companies to have at least a third of their directors female  by 2020.

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