2 Women on boards|
4. Just over 50% of staff in the financial services
sector are female;
however most of the women are in the lowest paid jobs and moving
up the job hierarchies there is a very sharp reduction in women
employees. The proportion of women in senior positions is far
lower. Dr Ferreira, a Reader in the Department of Finance at the
London School of Economics, told us that in 2008 the proportion
of women on boards in banks in the UK was 9%roughly the
same as the US. However, the proportion of women executive directors
was notably lower in the UK than in the United States.
In the UK I think the numbers are very, very
low. It is probably just 1% or 2% of all its executive directors
that are women and in the United States it is slightly more at
The Female FTSE Board Report 2009 also found that,
on the boards of the banks included in the FTSE 100, only 9% are
female; however most of the women are in the lowest paid jobs
and moving up the job hierarchies there is a sharp reduction in
At the time this Report was prepared, only four of the FTSE 100
companies had female chief executives, with a fifth starting in
May 2010. The poor
representation of women at senior level extends to accountancy.
According to the Institute of Chartered Accountants in England
and Wales (ICAEW) 10% of senior positions in accountancy were
held by women.
5. The UK performs badly in international comparisons.
In the 2009 Grant Thornton International Business Report, the
UK was ranked 26th in the world in terms of females
in senior management. The Philippines was firstthere women
hold more than twice the proportion of senior posts than the UK.
6. It is clear that the current situation is bad
but is it improving? The Female FTSE Board Report 2009 found that
in FTSE 100 companies there had been declines in:
- the number of companies with female executive
- the number of boards with multiple women directors;
- the overall number of companies with women on
The report showed that the percentage of women on
boards has increased slightly, but this was due to boards themselves
Indeed, in spite of the general increase in the percentage of
female board members overall, the percentage of female board members
in FTSE 100 banks had fallen from 12.8% in 2004 to 9.3% in 2009.
We note that the trend may not be true of all organisations. Barclays
told us that in 2008, 25% of their senior managers were women
compared to 20% in 2007.
7. While companies operate in different ways, in
general women are in the minority at senior levels in financial
institutionsespecially at the top. The boards of FTSE 100
banks are only 9% female compared to the FTSE 100 average of 12%.
The proportion of women executive directors is even lower at 1-2%.
8. Does it matter if women are underrepresented on
boards? There is evidence to suggest that companies with diverse
boards are likely to be better run, and that such boards are more
likely to challenge executives. Sir David Walker's report on corporate
governance highlighted the failure of individuals in the past
to "challenge the executive".
Sir David noted that the banks in which boardroom challenge was
part of the culture performed better than those where it was not.
Lord Myners, the Financial Services Minister, described one of
the largest risks in a decision making forum as "the mutual
reinforcement of prejudice and a desire to achieve early consensus
in a comfortable way".
Sir David and Lord Myners believed that diversity was important,
and emphasised that diversity extended beyond gender.
9. Dr Ferreira outlined the findings of research
on the effect of women on financial institutions' corporate governance,
which he had conducted with his colleague Professor Adams:
]there is some evidence that CEOs are
held more accountable to poor stock price performance in companies
that have more women on boards. Of course it is an indirect link,
but it does suggest that these boards are likely to behave more
independently from the CEOs and likely to punish the CEOs more
often after there is poor performance.
Dr Ferreira and Professor Adams also found that companies
with more women on boards had more included more equity-based
incentives in directors' compensation.
While designing the ideal remuneration system is more complex
than using more shares in bonus payments, equity based incentives
help align directors' interests to the performance of the company,
and the FSA has encouraged greater use of shares in their review
of remuneration policy.
10. The financial crisis has, in part, been ascribed
to excessive risk taking. Professor Goodhart considered "There
would have been less likelihood of the kind of financial crisis
that we have just had, had there been a very much larger number
of women CEOs [
] The longer term, more cautious tendency
with less of the alpha male would be highly beneficial."
Research conducted by the Aziz Corporation concluded that the
emphasis of masculine culture "encouraged and rewarded the
taking of excessive risk".
Dr Altmann considered that the financial crisis "would have
been much alleviated by having a moderating influence at the top"
and that "Finance needs more of the female perspective."
11. However, Kat Banyard of the Fawcett Society warned
against reliance on gender stereotypes, and told us that "research
which looked at women and men in leadership positions does not
find those differences in performance."
She felt that:
[...] the crucial issue is that, when you have
greater diversity and more women on boards you have less group
think. Women and men lead very different lives at the moment.
They bring different experiences with them. There are more opportunities
for diversity of thinking. I think it is that we need to concentrate
on instead of the traits that we assume women and men have differently.
Similarly, Ms Harman argued that a board with a mix
of both genders is superior to a male only board because women
can bring a different perspective which increases the diversity
of the board's views.
I think that women's lives are different from
men's lives, women's experiences are different, and therefore
they bring a different perspective, and therefore a board of men
and women is better than a men-only board.
12. It was also put to us that organisations which
do not seriously consider women are missing a large number of
Mr Last from RBS concurred, stating that "Promoting gender
equality is not only the right thing to do, it makes business
13. Concern about the under representation of
women on boards can be about business performance as much as fairness.
There is a consensus that an effective challenge function within
a board is required in financial institutions, and that diversity
on boards can promote such challenge. While it is impossible to
know whether more female board members would have lessened the
impact of the financial crisis, the arguments for fairness, improved
corporate governance, a stronger challenge function and not wasting
a large proportion of talent seem more than sufficient to conclude
that increased gender diversity is desirable.
A demand or supply problem?
14. We heard from Ms Nichola Pease that her opinion
was City firms would like to get more women on boards, and she
offered her personal experience that often women decided not to
pursue the most senior jobs.
As an experienced City worker, Ms Pease believed there were a
number of valid reasons why women might choose not to advance
their careers beyond a certain point:
a lot of women that could be on the board have
made choices not to go further up the organisation. They have
made those choices for a variety of very understandable, acceptable
reasons. It might be that they decide that they want to focus
totally on their family. It might be that they decide they want
flexible working practices and therefore the very senior jobs
might not be suitable for that. It might be that they decide they
do not want the responsibility and the extra hours that often
go with very, very senior jobs. I think the pyramid structure
means that as you go up an organisation, because of women's choices,
there are fewer senior women to choose from. 
15. Ms Turner of Barclays agreed that the problem
was not so much that firms did not want to hire women on boards,
but that there were not enough females who had the skills and
Sir David Cooksey of UKFI described a supply problem in UKFI:
[...]we went absolutely out of our way to search
for women for that [the Chief Executive of UKFI] role but unfortunatelyand
I do not know whythere was extremely little interest amongst
women about becoming chief executive of UKFI.
16. In contrast, Clare Dobie, President of the City
Women's Network, believed the demand problemthat firms
do not want to hire women on their boardswas far greater
than the supply problema lack of qualified, available women.
]there are no fewer than 1,800 women on
the boards of FTSE 250 companies and on the management committees
of quoted companies. They are all eligible to be considered for
the top jobs for the FTSE 100 companies and yet we still suffer
from only having 11.7% of directors of FTSE 100 companies as women.
The executive recruitment firm Sapphire Partners
also considered there was no problem with the number of eligible
Sapphire's staff have personally met with and
coached hundreds of senior women from the City[...]From our experience,
the supply of experienced successful committed female professionals
has never been stronger.
17. Much evidence highlighted a reason for the demand
problem was that of managers and recruiters hiring "in their
own image" and
choosing people "exactly like the existing board members
in their outlook and experience".
Dr Ferreira described previous research which showed that CEOs
preferred directors that were "demographically similar to
However, as we explored earlier, a homogenous board may not be
to the company's advantage.
18. The Walker Review noted that "while a majority
of NEDs [Non Executive Directors] should be expected to bring
materially relevant financial experience [
] there will
still be scope and need for diversity in skillsets and different
types of skillset and experience.
The Female FTSE Board Report 2009 showed there were 2,281 women
on corporate boards and executive committees or senior teams of
all FTSE listings. The report described this as a "huge and
growing pipeline of female talent available to feed into the top
The City might wish to look more widely in making its executive
searches. There are already 2,281 women on boards and executive
committees of all FTSE listed companies. We believe financial
institutions seeking new board members should broaden their horizons,
and consider a wider range of sources for their personnel.
19. We received evidence that in order to change
behaviour and culture in an organisation it is not just enough
to have one woman on a board. There was evidence that a number
of women on a board were needed to produce changes in behaviour
and culture which, among other things, would result in it becoming
more common practice to hire women into senior positions. We note
Ms Harman's remark that " [...] you have to have a critical
mass. It is really when the numbers change that we will see the
climate change [...].
20. In a letter to the Financial Times, Professor
Kogut from Columbia University claimed:
When you don't have women on boards in enough
numbers, a female director must rely upon other male directors.
Somehow, the percentage of female directors has to move past a
tipping point so that the selection of more women directors
becomes normal and non-controversial.
Ms Harman appeared to agree, referring to a critical
mass of women needed to mad it acceptable to raise issues of gender
21. One way of achieving a high proportion of women
on boards in a short space of time is by imposing quotas, such
as that Norway imposed for boards of publicly listed companies.
The percentage of women on boards in Norway was 6% in 2002 and
44.2% in 2008. However
Dr Ferreira noted that while quotas can achieve gains in the long
run, they are associated with costs in the short run:
] firms [in Norway] have observed some
drop in performance when trying to make that adjustment in a short
period of time. I am not here to say that this [a quota] is necessarily
a bad thing in the longer run but what I am saying is that of
course there will be costs associated with that. We must be aware
that going in the direction of imposing quotas will not be painless.
Our witnesses had mixed views about quotas for the
United Kingdom, though Government ministers and Professor Goodhart
were against legislation.
22. Instead of quotas, we heard that Ms Harman was
working with the CBI to develop a pledge, to increase the number
of women at senior level and work to improve equality of opportunity
for women. The
Financial Times has suggested a voluntary quota of 30%
amongst firms would show "serious intent" in redressing
the problem of such a gender imbalance at board level. The paper
proposed a comply or explain principle for firms with a lower
proportion of female board members if they choose to fill a vacancy
with a male candidate. It also recommended that chairmen of FTSE
100 firms with no female board members "should explain in
their annual report why they think this is acceptable."
Since we took evidence, the Government Equalities Office (GEO)
has told us that work to develop a pledge has been discontinued.
However, on 26 February, Lord Davies of Abersoch, the Minister
for Trade, Investment and Small Business, wrote to the Financial
Reporting Council proposing that listed companies should be required
what the current position is with regard
to director posts occupied by women and other underrepresented
how this meets the needs of the company,
its governance and business; and
what their policies are for achieving greater
diversity in the boardroom.
In addition, the GEO called for the provisions relating
to the appointments of new directors to the board to be strengthened
to ensure there was no implicit bias against underrepresented
candidates. We recommend the FRC should respond rapidly to
23. We do not consider that a legal requirement
for boards to contain a particular proportion of women is appropriate.
However, action by firms would be a clear signal to the public
that the sector is serious about gender equality and this is especially
true of financial institutions where the taxpayer has a significant
shareholding. It is disappointing that the CBI no longer appears
to be working on a voluntary pledge to encourage its members to
increase the number of women employed at senior levels. We note
that the changes proposed to the Corporate Governance Code would,
of course involve compulsory reporting rather than the voluntary
action a pledge would entail.
Progression to Board level
24. Women will only get to the top of City organisations
if they can progress from junior levels. The Walker Review said:
[...] despite the importance of improving diversity,
not least on bank boards, it would be unrealistic to expect to
reduce the present unfortunate gender imbalance by "parachuting"
into boardrooms as NEDs women without executive board or senior
executive experience elsewhere. The first focus of initiative
should just be in promoting the development of women to take senior
executive and executive board positions within the companies in
which they are employed. This will be an essential element in
boosting the scale and diversity of the pool of talent available
to fill NED positions in BOFIs [Boards of Financial Intuitions]
25. However, our evidence suggests that the financial
sector may not always recognise the interplay between developing
their female employees and ensuring a diverse senior workforce.
In their submission, RBS claimed they have played "an instrumental
role in advancing the gender agenda within the financial sector"
and told us that diversity values were part of their Code of Conduct.
Women make up 57% of RBS employees within the UK workforce as
a whole. 71% of the clerical population are female as are 41%
of the appointed and managerial grade.
Given this information, we were surprised that Mr Last told us:
[...] we announced last week that for senior
appointments, which would be the executive population, we would
have a female on the shortlist. We are doing that for various
reasons because it makes us look externally, to the outside market,
whereas we focused internally for a long time. It really makes
us look at the talent which is available on the market. 
The implication was that sufficiently talented females
did not exist within the organisation. RBS asserts its internal
job market offers "equality of access and opportunity for
everyone", but it appears to have failed to ensure its female
workers get enough experience to get to the top. More worryingly
still, the organisation does not appear to have recognized this
is a problem.
26. Board membership is, of course, the culmination
of a long career. If increased female representation on boards
is desirable, then one must look more widely at industry structures,
to ensure that able women who wish to progress are not held back.
We recognise that differences in male and female working patterns
may stem from preference rather than prejudice and that there
are circumstances in which employers need to make great demands
on their employees' time and flexibility. But the City needs to
ensure that it has access to the best talentfemale as well
27. Board members of all City firms should consider
the extent to which female employees can progress within their
organisation. As Sir David Walker said, promoting the development
of women to senior positions within the companies which employ
them will be an essential element in boosting the scale and diversity
of the pool of talent available for future board positions.
11 National Institute of Economic and Social Research,
Employment and earnings in the finance sector: A gender analysis,
Equality and Human Rights Commission Research Report 17,Spring
2009, p13 Back
Q 15 Back
Cranfield University School of Management, The Female FTSE
Board Report 2009, November 2009, p 19 Back
Four CEOS are listed in the Female FTSE Board Report, since then,
Alison Cooper was appointed as CEO of Imperial Tobacco, http://www.dailymail.co.uk/money/article-1226771/Cigar-loving-mum-Alison-Cooper-named-new-Imperial-chief.html Back
Ev 81 Back
Ev 35 Back
Cranfield University School of Management, The Female FTSE
Board Report 2009, November 2009, p 15 Back
Ibid., p19 Back
Ev 71 Back
Sir David Walker, A Review of Corporate Governance in UK Banks
and Other Financial Industry Entities, November 2009, p 45
(hereafter Walker Review) Back
Ibid., p 37 Back
Oral evidence taken before the Treasury Committee on 4 November
2009, HC (2009-10) 1088-ii, Q 174 Back
Oral evidence taken before the Treasury Committee on 3 November
2009, HC (2009-10) 1089-i, Q 22 and Oral evidence taken before
the Treasury Committee on 4 November 2009, HC (2009-10) 1088-ii,
Q 174 Back
Q 11 Back
Q 17 Back
See Treasury Committee, Ninth Report of Session 2008-09,
Banking Crisis: reforming corporate governance and pay in the
City, paras 38-39, para 55 Back
Q 36 Back
Ev 49, 51 Back
Q 85 Back
Q 39 Back
Q 39 Back
Q 214 Back
Q 206 Back
Ev 78 Back
Q 62 Back
Q 61 Back
Q 115 Back
Oral evidence taken before Treasury Committee on 4 November 2009,
HC (2009-10) 1090-i, Qq 89, 92-93 Back
Q 61 Back
Ev 62 Back
Ev 35 Back
Ev 43 Back
Q 25 Back
Walker Review, p 35 Back
Cranfield University School of Management, The Female FTSE
Board Report 2009, November 2009, p 35 Back
Q 244 Back
Letter to the Editor, "Pressure must be brought to bear on
boardroom quotas", Financial Times, 26 May 2009
Q 244 Back
Q 41 Back
Q 43 Back
Qq 5, 60, 62 [Ms Pease],232 Back
Q 228 Back
"How to build diversity on boards; A voluntary 30% quota
for women would signal intent", The Financial Times,
19 May 2009, p 12 Back
Ev 91 Back
Ev 94 Back
Walker Review, para 3.6, page 43 Back
Ev 77 Back
Ev 78 Back
Q 96 Back