Every time the subject of 'women on boards' comes up, the issue of quotas is not far behind.
Those urging compulsory targets typically do so not because they believe it's the right way but because they believe it's the only way to resolve the current under-representation of women in Britain's boardrooms. After years of little or no change, they argue, the time has come to simply make it happen. The European Commission is about to threaten legislation. Yet in my view, quotas are not only needless but potentially damaging and actually undermine the very equality the pro-quota lobby seeks.
The fact is, we're already seeing a radical shift in the way business leaders are approaching the issue of what makes a good corporate board - and that includes (but is not limited to) having a better gender balance. The numbers are lagging the mindset change - but there is plenty of evidence that it is happening and, importantly, is being driven by business reasons rather than political correctness. When the 30% Club was first mooted in April 2010, many of the chairmen I contacted to sign up to a voluntary goal of 30% women on boards by 2015 (compared to the 12.2% at the time), asked 'Why is this important?' We officially launched November that year, with just seven supportive Chairmen. Now there are 37 - and the question is less often 'why?' than 'how do we get there?'
While the Davies Report and the 30% Club have been helping to catalyse this change in attitudes, a key driver is the financial crisis. It's now acknowledged that boardroom failings contributed to the individual corporate and broader economic problems we're all still addressing. As a result, Chairmen, nominations committees, executive search firms and investors are all reassessing what makes an effective board. The 'old gentleman's club' as Lord Davies describes the typical boardroom of the past has - unsurprisingly - been proven to be the wrong way to oversee a company. A modern successful company needs a board of directors who bring a range of experiences, perspectives and personalities to the table, so the danger of 'groupthink' is lessened. A mix of men and women, young(ish) and old, drawn from different educational and international backgrounds and with varied expertise, is the ideal board of today.
If this is now so obvious, why is change still gradual? There's been an improvement in the numbers - 15.2% of FTSE-100 board directorships are now held by women and the ratio of female appointments has doubled over the past year - but is still only 27%. Behind this apparently slow response, a number of steps have been taken that are only now starting to take effect and I believe we'll soon see an acceleration. The headhunters, often criticised in the past for putting forward tried-and-tested lists of boardroom candidates are now thinking more laterally, spurred on by the Voluntary Code they developed following Lord Davies' recommendation. They've started looking at the public and voluntary sectors, for example, to widen the pool of female candidates - the appointment of Jasmine Whitbread, CEO of Save the Children International, to the BT Group board last year, was a breakthrough. More generally, they are working hard with Chairmen and nominations committees to help them create an effective team at the board and senior levels of a company, rather than simply referring to a list of 'the great and the good'.
The next big impetus, I believe, will come from the investment community. Last year, at a 30% Club event, Martin Gilbert CEO of Aberdeen Asset Management suggested that if investors threw their weight behind this issue, it would take just a year to solve the problem. The 30% Club has an investor group comprising 11 institutions, including behemoths Legal and General Investment Management and Blackrock, who are serious about effecting change - and together, the assets we manage total over £1.7trn. A week ago on the 1st anniversary of the Davies Report, we held a seminar which attracted over 150 delegates from the fund management community. Guidelines were proposed for investors to engage with companies on the issue and the response was overwhelmingly positive. Investors are looking for companies to diversify their boards because we want to see better-run businesses - and as big shareholders we have the clout to effect change. Chairmen of publicly listed companies are re-elected annually; one practical suggestion made at our seminar was that shareholders should abstain or vote against the re-election of those remaining chairmen who just don't 'get it'. Significantly, though, the other main theme at the seminar was the importance of the UK's 'comply or explain' approach to good corporate governance. Investors don't want quotas; board directors need to be there on merit and there's evidence that shareholder value can be destroyed if quotas are imposed.
Even if these voluntary steps are starting to work, should the government do more to speed up change? The Prime Minister is already doing a lot behind the scenes. As well as high profile events like the reception he hosted at No.10 last October for women in business, David Cameron and his team have been working on several ideas to support business-led initiatives. For many months, they've been working with the 30% Club to broaden mentoring programmes and help create a database of 'board-ready' women. I believe the Prime Minister wants businesses to sort this out themselves, though. He threatens quotas if they don't, but is certainly not hoping to impose them. At the Northern Future Forum in Stockholm in February, where the British, Nordic and Baltic premiers compared notes on the issue, we heard how even those countries with quotas and very different, shared approaches to childcare than the UK are still struggling with genuine equality at all company levels. Yes, Norway has 40% female non-executive directors but only 2% of its CEOs are women. Quotas are not just controversial but they don't work either, if we want better gender balance at all levels and better business outcomes. Business culture needs a revolution to avoid the problems of the recent past. Better balanced boardrooms are one aspect of that revolution.
I'm convinced we're on the right path without quotas. There remain some laggards who don't seem to realise that the alternative to making the changes themselves is to have them imposed through legislation - this is perhaps the last chance for them to choose that route and avoid being told what to do by Europe.
Helena Morrissey is CEO of Newton Investment Management and founder of the 30% Club