Board Diversity: Women on Boards

In brief 

The effectiveness of a board is important for the success of any business. The composition of the board is an important factor in this and diversity, in all forms is key, including skills, experience, ethnicity and gender. There has been a global focus on gender diversity and increasing the number of women represented on boards, across all lines of business and sectors.  Gender diversity would represent a starting point for a wider assessment of diversity and inclusion. 

A number of studies have shown that gender diversity and the inclusion of women in male dominated boards, directly correlates to a more efficient, functioning board and more careful and considered decision making. Therefore, boards should be making an effort to ensure a gender diverse composition and taking steps to rectify any imbalance. In this article we will focus on implementing change, how a company or its board can look to increase the presence of women to create a more inclusive and diverse environment at the most senior level

What action needs to be taken to increase the number of women on your board?

We have noted above some of the initiatives being undertaken by governments and other organisations to push this agenda in the region. However, unless a company is subject to a mandatory requirement, it is for each company to decide whether to implement such change and decide on the level of its importance. 

Increasing the number of women on boards is not an easy transition to make. This type of cultural shift involves a number of considerations, sensitivities as well as significant stakeholder and change management. It is a transitional change which will also require the diversity agenda being pushed more broadly across the workforce. According to PwC’s “Women in Work Index - Insights from Middle East and North Africa” survey, 66% believed that governments should intervene in private-sector & set targets for gender diversity.

Four key questions the board (in particular the chairperson and the company secretary) should ask themselves, are the following:

1. Is the diversity of the board properly considered / reviewed on a regular basis;

2. Have the right nomination processes been put in place to help facilitate diversity and are these documented;

3. Is the current composition of the board accommodating to women on the board; and  

4. What are the real barriers to having women on the board or increasing the percentage of women on the board and has any action been taken to remove these barriers once identified.

Through the process of addressing a board and its directors’ position on the above points, the groundwork for a gender diverse board can begin and foundations for change can be laid. We look at each of these questions in more depth below to ascertain their importance.

1. Regular review and consideration of diversity on the board
   Best practice would show that the composition of the board is regularly assessed and considered and that regular effectiveness reviews are undertaken. The board should include a mix of skills and experience as well as a balance of gender.  In a world where  economies and markets are constantly changing and where trends and crises have a global impact, it is imperative a board is flexible and skilled to meet challenges. Being proactive rather than reactive is crucial for an effective board.  Setting a clear process, with a policy for regular review and consideration of diversity on the board, should ensure the board is inclusive and is seen as diverse, representing a wider stakeholder group. Particular focus on gender can properly be given, and with the consistent studies that demonstrate the positive impact of having a gender diverse board, it would be neglectful to ignore gender diversity in this review.

2. Nomination processes to facilitate diversity 
   The process for nomination and appointment to the board directly correlates to increasing the number of women on boards. If the process is fair and diversity is considered at the nomination stage, there is more chance of a diversified board composition. Certain regulators (e.g. the SCA and UAE Central Bank as mentioned above) have made a certain percentage of women candidates mandatory. This is a very positive step towards implementing an increase in the number of women on the board, as it forces the consideration of women without imposing a mandatory quota which some may view as restrictive and possibly detrimental.
   Even if there is no requirement from a regulator, it would be advisable for companies to adopt clear nomination processes/policies that include mandatory consideration of female candidates. Setting a clear framework for assessing a certain number of female candidates should facilitate a move towards diversity on the board.

3. Accommodating women on the board
   If the board has been operating for a long time without any female presence, it will undoubtedly change the dynamic of the board in some way and it will take time to adjust to this change . However, this should really set apart those boards that truly are effective, to those that are stuck in their usual ways or “group think” with no real challenging discussions.
   
   There are cultural considerations that board members may need to be more conscious of, which may require specific training to develop the board and to avoid any unconscious bias. The chairperson’s role becomes even more important in this regard, as the leader of the board, this individual (with the help of the company secretary) should ensure that any new board member is inducted sufficiently and given a fair opportunity to voice their views at board meetings. This applies to any new member, but particular regard should be given to this by the chairperson for a new member that is a minority.

4. Barriers
   There may be certain barriers to appointing women to the board, an obvious one is there being a shortage of senior women with the expertise in the industry in which the company operates. Once the barriers are identified, there should be commitment to removing these barriers. This might not be straightforward and could be a long term strategy, but it is imperative that a plan is made. For example, if the concern is a lack of senior women, the long term goal could be to set targets and focus on recruitment and promotion of women at all grades in the business, in order to increase the pool of senior women.