Leading companies should aim to have a minimum of one in four female board members as part of "radical" changes to increase the number of women at the top of business, a Government-commissioned review urged today.
Former trade minister Lord Davies of Abersoch said UK-listed companies in the FTSE 100 should have a minimum of 25% female board member representation by 2015.
Companies should set targets for 2013 and 2015 to ensure that more talented and gifted women can get into the top jobs in companies across the UK, said the report.
Lord Davies also called on chairmen to announce these goals in the next six months and chief executives to review the percentage of women they aim to have on their executive committees in 2013 and 2015.
But he stopped short of calling for quotas to be introduced unless the voluntary measures failed, after finding a lack of support for the measure during his review.
"Over the past 25 years, the number of women in full-time employment has increased by more than a third and there have been many steps towards gender equality in the workplace, with flexible working and the Equal Pay Act. However, there is still a long way to go," said Lord Davies today.
"Currently 18 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.
"Radical change is needed in the mindset of the business community if we are to implement the scale of change that is needed.
"This is not about aiming for a specific figure and is not just about promoting equal opportunities but it is about improving business performance.
"There is growing evidence to show that diverse boards are better boards, delivering financial out-performance and stock market growth."
The former minister said there had been a huge amount of interest in his review, which he hoped would mark the beginning of a "step change" so that more talented women got seats on boards.
The report urged the Financial Reporting Council to amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity.
Lord Davies also recommended that investors should pay close attention to its recommendations when considering reappointments to a company board and that firms should periodically advertise non-executive board positions to encourage greater diversity in applications.
Head-hunting firms were pressed to draw up a voluntary code of practice addressing gender diversity in relation to board level appointments to FTSE 350 companies.
Lord Davies said research from Cranfield University had highlighted a lack of female directors in Britain's top businesses, with women making up only 12.5% of directors in the FTSE 100 companies in 2010.
The FTSE 250 companies have an even lower proportion of female directors at 7.8%, and nearly half of them do not have any women in the boardroom.
Helen Alexander, president of the CBI, said the review had been "wise" to avoid quotas, which she believed would not have addressed the real issue of how to bring about a cultural change.
"The lack of women at board level needs addressing urgently, and the best way of achieving this is through companies reporting on their progress.
"We believe firms should report against internally-set targets that reflect different starting points, the nature of particular sectors, and the size and structure of the board.
"Lord Davies's report rightly proposes that chairs of FTSE 350 companies should set the percentage of women they aspire to have on their boards, based on the characteristics of their business.
"A Government-set target for FTSE 100 directors would not reflect the different circumstances of individual companies. It should be for companies, not the Government, to set an appropriate target."
Laura Whyte, personnel director at stores giant John Lewis, where half the board is female, commented: "As a business that continues to invest heavily in our people, John Lewis welcomes the emphasis the Government has placed on the gender equality issue through Lord Davies's report.
"I would however argue that the introduction of quotas for women in boardroom positions is not the way to address this balance. Instead, business leaders must take responsibility for building an effective talent pipeline, and make it a commercial priority to identify, invest in and train potential leaders from its entire workforce. It is also vital that women in senior positions act as role models and mentors to other women who aspire to work at this level."
Christine Hodgson, chairman at Capgemini UK, said: "Mixed gender boardrooms are beneficial, both in terms of bringing different perspectives to the table and promoting diversity in the workplace. While I believe that setting targets will create a focus and drive for change, I don't believe that forcing quotas is the most appropriate way of increasing the number of women in the boardroom.
"Any professional wants to climb the career ladder based on the recognition of skill, talent and determination, not because the board feel obliged to meet quotas. Lord Davies's report quite rightly brings an important issue to the forefront of the Government and business world's agenda but it is important to remember that future talent needs to be nurtured."
Financial Reporting Council (FRC) chairman Baroness Hogg said: "The FRC believes that diversity at the board table can help to make boards more effective, for example by reducing the risk of 'group think'.
"The change we made to the code last year has helped to trigger a significant change in attitude to the persistent failure of companies to appoint more women to boards, depriving themselves of the benefits of the full talent pool available to them.
"However, as Lord Davies says, progress remains slow, and so we will consult on whether to make further changes to the code to encourage companies to report on their policies and ambitions in this respect".
John Walker, chairman of the Federation of Small Businesses, said: "While we welcome the fact that the Government is looking to increase the number of women on boards, the FSB believes more needs to be done to encourage women to become entrepreneurs in their own right. There are still relatively few female entrepreneurs and men are twice as likely to start a business as women.
"Increasing the number of women starting their own business will give the economy a much needed boost, and as these firms grow they will take on more staff, helping tackle unemployment. It is good that the Government is ensuring that more women are represented at the top level of business, but it is through becoming an entrepreneur where women will garner the strong skills they need to sit on boards. So to truly get women to the top of business, female entrepreneurship needs to be made into a real option."
Helen Wells, acting director of gender campaign group Opportunity, said: "The recommendations should be welcomed for their pragmatism. Increasing the diversity of UK boardrooms is something which delivers business success and commercial advantage. I believe that better balanced boards are better boards."
Jackie Orme, chief executive at the Chartered Institute of Personnel and Development, said: "We welcome Lord Davies's focus on a voluntary approach. His review marks the start of a process.
"It is the right start, but everyone involved in the governance of British firms now needs to step back and recognise that there needs to be a fundamental shift in established perceptions of what a great board member looks like. That is the only way we will ensure we get to and beyond the 20% target swiftly and in a sustainable way."
Stephen Alambritis, commissioner at the Equality and Human Rights Commission, said: "At the current rate of change it will take 73 years for women to achieve equal representation on the boards of FTSE 100 companies.
"We need to speed up progress. This is not just a moral issue - our businesses are paying a penalty. There is evidence that more diverse boards take better and more responsible decisions.
"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.
"We do, however, need them to demonstrate real progress on this issue - and not just in relation to women but in terms of diversity of all kinds.
"The Commission will make this a priority for our investigations over the next two years. We hope that our work will show that companies are really taking action."Reuse content