“This report provides real evidence that business is taking the issue of board diversity seriously and is working to bring about the necessary changes.”
Vince Cable, 13 March 2012

The background

The government is trying to encourage the UK’s top companies to bring more women into the boardroom.

A report by former Labour minister Lord Davies last year proposed that FTSE 100 firms aim for 25 per cent female board membership by 2015.

But he stopped short of recommending a legal quota like the one introduced in Norway, and ministers are keen for UK plc to put its own house in order without diktats from government.

That’s why the latest Cranfield University study on female representation in top companies, which shows an impressive increase in the number of women board members, has been greeted so warmly by the government.

The business secretary said: “It demonstrates why we don’t think quotas are necessary at the moment as the UK is making the voluntary approach work.”

We’ve already FactChecked the economic case for having more women in the boardroom, and found that there is an evidence base for the idea that diversity is good for business.

But is that message really getting across to big businesses?

The analysis

The headline figure from the Cranfield report is that women now make up 15 per cent of all directorships in FTSE 100 companies. Last year it was 12.5 per cent, and if this rate of improvement continues, we’ll be on course to hit the 25 per cent target by 2015.

So far so good. But as the authors note, Lord Davies’ emphasis on boardroom appointments masks a big question about how much real power women are wielding in the business world.

There is of course a huge difference between non-executive board directors – who vote on major corporate decisions but have little to do with the day-to-day running of companies – and executive directors, the people who actually operate the business.

There has been a disproportionate increase in the number of non-executive appointments, while the rate of increase is much smaller for executive roles.

And the total numbers we are talking about are so low that expressing changes in terms of percentages and proportions may not actually be very helpful.

While it’s fair to say that the number of women in board-level management roles has almost doubled in just over a decade, the total number of women has only gone up from 11 to 20 between 2000 and 2011.

So female executive directors are a very select few, and their ranks have only been swollen by an average of one woman a year over the last decade.

To put it another way, 20 female executive directors is only three more than the 17 achieved in 2003 and 2004.

Overall it’s a picture of very slow progress, and if we widen our focus to take in the UK’s top 250 companies, there’s even less cause for celebration.

Across the whole of the FTSE 250, the number of female executive directors has not changed significantly since 2006, the first year for which we have figures. For the record, there were 29 executive directors in 2006 and 28 in January 2012, according to Cranfield.

The verdict

It’s perfectly true that female board directorships – both executive and non-executive – have gone up significantly in the last year.

But is that just corporate window-dressing, with little real influence passing into the hands of women?

It’s a serious point for the government to consider, as much of the academic evidence they rely on to claim that diversity helps business performance looks at the effect of women in senior executive roles, rather than just board membership in general.

As an aside, business leaders might be justified in feeling that they have little to learn from politicians on the subject of diversity.

Research by the Equality and Human Rights Commission (EHRC) shows that, while the number of female MPs and peers has increased slightly over the last decade, the figures for female council leaders and members of the Scottish parliament and the Welsh assembly have dropped.

And of course, there are fewer women in David Cameron’s cabinet than there were under the previous government.

(In the interests of fairness, we ought to admit that the media is far from a paragon of virtue either, as page 6 of the EHRC report shows.)

By Patrick Worrall