Quota system for women on boards in Britain

Lord Davies's dismissal of a quota system to allow more women to sit on top UK boards is a lost opportunity
Lord Davies's report Women on Boards will do little to rectify the dearth of senior women in the UK's top companies. His rejection of imposed quotas in favour of voluntary targets of at least 25 per cent female representation on FTSE-100 boards by 2015 lets companies off the hook. The recommendation that the "comply or explain" principle be enshrined in a revised corporate governance code allows firms to carry on as they have always done, and excuse their lack of progress with a traditional argument about "lack of suitable or available female talent".
Female talent abounds—it's just that it is often not directly under the noses of boards. I've argued here before that the real losers are not the women who don't make it to the board but companies themselves, not to mention their shareholders. Most women consciously step off the corporate career ladder, unwilling to make the sacrifices to the rest of their lives that a senior job in a top company requires. But unbalanced boards have consequences for corporate success, and Davies sets out the business case, with a body of supporting evidence, persuasively in his report.
For example, research shows that companies with more board-level women enjoy a 42 per cent higher return on sales, a 66 per cent higher return on invested capital and a 53 per cent higher return on equity than their rivals. Also, gender-balanced boards are better able to understand their equally gender-balanced customers and stakeholders, as well as bringing different perspectives, ideas and challenges that cut through group-think.
What's more, it makes no sense to have half the available competencies-those embodied in women-sitting outside the door, particularly in a climate where good people are hard to find and keep.
The wonder is that more boards don't understand the business case. Maybe they do, but dominated by men as they are their fear of being overrun by women outweighs their ambition for corporate success. The possibility that Britain's boardrooms are the last bastions of male chauvinism is a depressing thought.
Even more dispiriting is the fact that gender bias is so hardwired in companies-whose structures were designed by and for men-that women themselves are prejudiced against their own sex, albeit unconsciously. The new targets "must not result in helicoptering women into top roles", said Penny de Valk, chief executive of the Institute of Leadership & Management. Men are helicoptered into top jobs all the time, ostensibly as saviours but with mixed results. So why should women be denied the same chance?
Another woman I spoke to said quotas would create "a false environment", but would it really be any more false than the one that sees most (male) non-executive directors nodded into jobs through the old boys' network, without a formal interview?
Most of the 89 per cent of respondents to Davies's review who opposed quotas were women-afraid, it seems, that appointments under the quota system would devalue women's contribution. But isn't this slight possibility infinitely preferable to the current system, which prevents them making much of a contribution at all?
In truth, most of the arguments against quotas hold for targets too, so it's disappointing that Davies didn't bite the bullet. Despite their drawbacks, quotas would seem to be no more imperfect than the system that has prevailed for too long-and they could prove the platform for change that we so clearly need. According to the most recent Female FTSE report from Cranfield School of Management, women still made up only 12.5 per cent of the members of FTSE-100 boards and 7.8 per cent of FTSE-250 boards in 2010.
Four out of 10 Norwegian directors are now female since the introduction of quotas in 2008, and there hasn't been a major corporate collapse there. Other European countries are set to follow suit, and it seems inevitable that unless British companies set and meet the required targets it will be only a matter of time before mandatory quotas are imposed here, too.
But it will be a short-sighted company that attempts to simply paint over the damp wall of organisational structures, processes and cultures that repel, rather than attract, ambitious women, and lots of talented men, too. Real change will come from a combination of the "push" of quotas and the "pull" of more attractive working environments.
So the collective sigh of relief echoing around Britain's boardrooms needs to turn into the panting of exertion as boards wrestle with the rising damp and dry rot which, if left untreated, could bring the whole edifice crumbling around their ears.