Let charities help to balance the boardroom
Studies agree that companies do better with diverse directors and a percentage of women at the top. Lynne Berry, OBE, Senior Visiting Fellow at Cass, identifies a ready source of experienced candidates.
Diversity is good for the boardroom. Companies that have directors from different cultures and a higher proportion of women as part of their governance do better. A McKinsey report compared returns on equity and margins on earnings before interest and taxes (EBITs), for 180 companies in France, Germany, the UK and USA between 2008 and 2010. Those in the top quartile for diversity and with the highest proportion of women on their boards had equity returns 53 per cent higher than those in the bottom quartile and EBITs 14 per cent higher.
Diversity makes good business sense and encourages broader strategic thinking. The Davies report in the UK recognised the need for increasing the number of women on boards and British business is beginning to respond: 55 per cent of non-executive appointments made to FTSE 100 boards between 1st March and 22nd October 2012 were women. This is great news, especially as appointments are relatively infrequent. However, the number of women appointed to all executive boards reduced in the same period. And companies still seem to be missing out on cultural diversity at board level, not straying too far from "people like us" who will fit in.
When Lord Davies suggested new sources for experienced board-level women he pointed to the public sector the professions and the universities but failed to mention the voluntary sector, thus ignoring a source of some of the most experienced entrepreneurs, inspirational leaders and creators of growth.
In April 2012 Cass set up an initiative to find women from the voluntary sector who were interested in exploring the idea of becoming non-executive directors on FTSE boards. It was supported by then Cass Dean Richard Gillingwater, the National Council for Voluntary Organisations and Helena Morrissey, Chief Executive of Newton Investment Management and founder of the 30% Club of FTSE 100 chairmen committed to increasing the number of women directors. Seven women joined the programme. They were all CEOs of major brands such as Oxfam, St John Ambulance and RNIB, and they had previously been non-executives on government, charity and housing association boards, regulators, Treasury officials and even an MP.
I was part of the initiative and also interviewed all the women. It was clear that they were exploring options: they were not intending to give up on the charitable sector but to use their executive and non-executive expertise in new ways. They were experts in accountability, demonstrating impact, building public trust, stakeholder engagement and producing high-quality results to a strict bottom line. They were specialists in corporate strategy, the diversification of resources, investment strategies, cultural change and motivating people without much financial reward and they told stories that inspired.
The specifics of financial corporate governance, the influence of market analysts, the responsibilities of being, say, the senior independent director, were to varying degrees new to the participants and Cass helped to fill these gaps with master classes.
The women were all highly skilled and, before this programme, none had been approached to join a FTSE board. This might now change. At the end of the programme there was a real sense from headhunters that these women would be a tremendous addition to any board.
I look forward to seeing how many decide they want to get on to FTSE boards and how many make it. After all, these companies need women and greater cultural diversity. And I think we have found a way of giving businesses a real, measurable, competitive edge: look to these women who have run not-for-profit businesses and use their skills for growth, to increase shareholder value and create businesses that can be true to their mission.