Businesses urged to 'radically change' way they promote women

The Davies report calls on leading firms to fill one in four board positions with women by 2015 – or face compulsory quotas

Britain's leading companies have been threatened with compulsory quotas if they fail to voluntarily boost the number of women in their boardrooms and implement a "radical change" in the way they promote senior female members of staff.

Lord Davies's report on gender equality at the top of the corporate world recommends that at least 25 per cent of the board membership at FTSE 100 companies be female by 2015 – double the present proportion – and that chief executives of the 350 largest UK companies should announce their "inspirational targets" for the boards of their own companies by September.

The Davies report also calls on companies to review the proportion of women represented on executive committees, immediately below board level.

The report was commissioned by the Business Secretary, Vince Cable, and the Minister for Women and Equalities, Teresa May, last year.

While rejecting the idea of compulsory quotas as "tokenism", Lord Davies said that "if the market is unable to correct itself, then quotas are a threat." However, he hoped the business case for improving female representation would be solid enough to persuade many firms to change their ways. The report states: "Evidence suggests that companies with a strong female representation at board and top management level perform better than those without and that gender-diverse boards have a positive impact on performance. It is clear that boards make better decisions [when there is] a range of voices, drawing on different life experiences."

Lord Davies, a former banking executive, added that if one third of new board appointments were female then the 25 per cent target for larger companies would be achievable with only 135 female board appointments.

Yet the Davies recommendations face significant obstacles. Eighteen FTSE 100 companies have no female directors at all, and nearly half of all FTSE 250 companies do not have a woman in the boardroom.

Research by The Independent indicates that many of the UK's largest and best-known enterprises have a long way to go before meeting the recommendations. At BP, for example, 92 per cent of senior managers are male; at Unilever the figure is 90 per cent; at 3i 86 per cent; and at Marks & Spencer, Vodafone, the John Lewis partnership and Pearson roughly 75 per cent of managers are men. Lord Davies identifies the career "attrition" of women staff as a key factor limiting their emergence at very senior and board levels.

According to figures from the Office for National Statistics, the gender "pay gap" has now been reversed for workers in their twenties, with women earning more than males; but by their thirties and forties the balance has shifted back in favour of men, suggesting that women leaving to start families still find it difficult to make up for lost promotion opportunities when they re-enter the workforce. This remains a significant factor in the persistence of gender inequality.

Stephen Alambritis, commissioner for the Equality and Human Rights Commission, commented: "At the current rate of change it will take 73 years for women to achieve equal representation on the boards of FTSE 100 companies. Clearly, we agree with Lord Davies that business needs to put its house in order. We also agree that it would be better for companies to take action themselves without Government having to impose quotas upon them."

Penny de Valk, chief executive of the Institute of Leadership and Management added: "We know that the talent is out there so UK business must be more flexible to achieve the required flow of female leaders into senior roles. However, this must not result in helicoptering women into top roles. Instead UK plc has to build an effective talent pipeline for female leaders."

Under the Davies proposals, quoted companies will be required every year to disclose the proportion of women on their board, the proportion in senior positions, and the overall proportion of women employees.