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Women’s Day, but a man’s workplace
Submitted by Sophie Crocker on Fri, 03/09/2012 - 11:49
One need only look at some recent statistics to realise the prevailing gender gap in the private sector. For example, female executives are paid nearly 10% less than men for performing the same role. In 2010, women made up just 12.5% of FTSE100 boards with only 5.5% in executive directorships. Furthermore, 25% of the female workforce in the UK is paid less than £7.20 per hour. This ought to make uncomfortable reading for anybody concerned about gender inequality but it should also unsettle business leaders, women and men alike.
A year ago Lord Davies published a report on increasing the number of women on boards, citing better company performance and decision-making, access to the widest talent pool, greater market responsiveness and better corporate governance as reasons for companies to pursue gender diversity. However, we cannot expect that this ‘add women and stir' approach to be the panacea to the finance industry's shortcomings. Facilitating more women onto boards is important to decision-making but is clearly part of a wider issue of board diversity more generally, or lack thereof.
Of course, the gender issue is not limited to the confines of the boardroom, disparity of pay disproportionately affects women at all levels of a company. For example, two thirds of workers in low paid positions are women. FairPensions' Living Wage campaign has been having a big impact for thousands of women working for some of the UK's largest companies and banks. According to a London Economics survey, where companies have made this investment in their workforce, they have reported significant decreases in staff turnover, absenteeism and sick leave, with as many as 80% of the companies believing that the Living Wage enhanced staff productivity. Put simply, the Living Wage pays dividends.
With such compelling business cases with wider reaching socio-economic ramifications, why isn't there a race to close the gender gap amongst investors? A recent report from the University of Cambridge argues that the reason is two-fold. First, proactive engagement by shareholders is restricted by a prevailing culture of conservatism amongst institutional investors, especially the pension funds. This lack of engagement on the issue may be a bigger obstacle to progress than women's so-called ‘board-readiness', one of the prevailing arguments for the status quo. Second, there is an apparent hierarchy of issues within SRI, where board diversity does not carry as much weight as environmental or governance issues. Though one could argue that all these issues are not mutually exclusive, on the contrary, better boards may improve decision-making in all of these areas.
For the 30% Club and others, the point is just this. Diverse boards are better boards and better boards mean better business. In response to the European Commission's proposal to introduce mandatory targets for companies in the EU to make women 30% of board members by 2015 and 40% by 2020, Helena Morrissey, founder of the 30% Club, rejects quotas in favour or a voluntary approach on the grounds that quotas "undermine the principle of equality and are patronising to women." Not only that but they may also damage shareholder value.
However, according to Viviane Reding, the EU Justice Commissioner and driver of the EC initiative, at the current rate it would take 40 years to reach a significant gender balance of at least 40% of both sexes. Given such glacial progress, one can understand the frustration and sense of urgency to impose "creative regulation" on companies. If the UK's private sector does not want to face regulation, the inertia inducing conservatism within institutional investors like pensions funds needs to be challenged. Shareholders need to start sincere engagement on diversity, not in response to public pressure for companies to be more ‘PC' or pressure from rights-based pressure groups, but for the positive impact it can have on business.
If you feel strongly about low pay and board diversity, why not come to our Shareholder Activism Training on March 31 and challenge these companies yourself?