Outlook There will no doubt be some whingeing today as the Financial Reporting Council unveils the new corporate governance code for UK companies. The Confederation of British Industry, for one, is already voicing concern over the new requirement for directors of FTSE 350 companies to submit themselves for re-election each year.
It is worth remembering what prompted the latest review of the code: the failure of the boards of so many of our largest financial institutions to properly scrutinise the decisions being made by their managements, let alone to get to grips with the scale of the risks being taken on behalf of shareholders. In that context, the revisions to the code that emphasise issues of accountability, competence and diversity are all welcome.
So too is the introduction for the first time of a requirement to consider gender when thinking about the composition of the board. But will this oh-so-gentle provision be sufficient to provide a speedy remedy to the chronic under-representation of women on the boards of UK plc? Among FTSE 100 companies, for example, women account for just 12 per cent of all directors, while a quarter of the index's constituents do not have a single female board member.
Lynne Featherstone, the Equalities minister, describes the new code as "an important step" in encouraging gender diversity. But it will be interesting to see whether her colleagues in the Cabinet – more male than it has been for a considerable period – want to do more. The last government, for example, promised to force state-owned companies such as the nationalised banks to raise female representation on their boards within two years. It ran out of time to keep its promise: Ms Featherstone should take up the cudgels.
Still, even if she meets the challenge at Royal Bank of Scotland and Lloyds Banking Group – a single female board member each at the last count – will Ms Featherstone reconsider the traditional British opposition to legislation for the private sector? Norway, for example, requires all companies to ensure that women account for at least 40 per cent of the board.
Successive British governments have insisted that this is the wrong way to tackle the problem – that appointments should be made for meritocratic reasons only, rather than driven by quotas, and that companies need to be encouraged, rather than forced, to appoint more women. But while one understands the reluctance to dictate to privately owned businesses, the problem is that the softly-softly approach shows no sign of bearing fruit any time soon.
Even with legislation in place, gender equality in the workplace is tough to deliver. The Equality and Human Rights Commission celebrated the 40th anniversary of the Equal Pay Act yesterday by pointing out that women in full-time work currently earn an average of 16 per cent less than men. Without tougher laws, boosting female representation on company boards to acceptable levels looks like a pipe dream.