Increasing representation of women on private sector boards in Scotland

1.Introduction

Background

Scotland's Economic Strategy (Scottish Government, 2015) sets out the Scottish Government's purpose 'to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth'.One of the four areas of focus of the strategy relates to Inclusive Growth that seeks to address long-standing barriers to equality and diversity in the labour market as an economic policy.

With Scotland's first gender balanced cabinet, the First Minister has challenged all public, private, and third sector organisations to commit to take action on gender inequality with the launch of a voluntary Partnership for Change commitment to achieve a 50/50 gender balance on boards by 2020.Partnership for Change builds on the ongoing work of the Public Boards and Corporate Diversity Programme.The programme has three strands:

• Strand 1 - To improve the percentage of women and other under-represented groups in leadership roles in Scotland, by fostering an enabling environment and securing a commitment to improved diversity by 2020.
• Strand 2 - To make Ministerial public appointments more diverse reflecting broadly the general population in Scotland by 2020.
• Strand 3 - To make Scottish Government's senior leadership more diverse reflecting broadly the general population in Scotland by 2020.

Partnership for Change is working alongside other actions to tackle inequality including the Scottish Business Pledge . The Scottish Business Pledge is a voluntary commitment that companies in Scotland can make to adopt fair and progressive business practices. The Scottish Business Pledge has nine components:

• Paying the Living Wage.
• Committing to an innovation programme.
• Pursuing international business opportunities.
• Not using exploitative zero hours contracts.
• Supporting progressive workplace policies.
• Supporting Invest in Youth.
• Making progress on gender balance and diversity in the workforce and boardroom.
• Playing an active role in the community.
• Paying suppliers promptly.

To make their Business Pledge a company has to be paying the Living Wage, already delivering at least two other elements and committed to achieving the rest over time.

The lack of women on boards is not unique to Scotland and has been identified as a key issue across the globe, with women under represented in the boardroom across Europe, US and Asia.Globally just 16% of board roles are held by women (Grant Thornton, 2015). Although the period September 2011 to February 2015 recorded a steady increase in the number of women on FTSE 100 and FTSE 250 boards, 77% of FTSE board seats are held by men and 70% FTSE board appointments go to men (Vinnicombe, Doldor and Turner, 2014). Of Scottish based companies in the FTSE 100 ^[1] , 25% of the total number or board positions are held by women and at the FTSE 250 ^[2] level, they represent 18% of the total (Scotland Office, 2015). This is indicative of a wider problem in which:

• 'Businesses are losing their best and brightest female talent from the pipeline before they even get a change to smash through the glass ceiling' (Rosati and Bailey, 2013, p. 8).

Gaps in the Research Base

The majority of the research evidence on board diversity focuses on the under-representation of women, the number of female directorships, the characteristics of female directors, the characteristics of companies with female directors and the range of generic barriers faced by women in seeking leadership positions (Government Equalities Office, 2009, p7). The influential Davies Review (2011) presented a strong evidence base focusing on the numbers (and how to increase the numbers) of women on corporate boards ^[3] .In broad terms the research evidence on the constraints in the talent pipeline and the relatively slow change in the numbers of women being appointed to Executive Director positions is more limited (Vinnicombe et al., 2015).More specifically there is limited research evidence that focuses on:

• Smaller private sector companies i.e. whether there are any significant differences from big corporate companies that need to be considered. The majority of the research on women on private sector boards relates to large corporate e.g. FTSE 100 or FTSE 250 companies.There is a need for a better understanding of the behaviour and support needs of smaller organisations.
• The assessment of interventions and approaches i.e. what works. There is limited evidence that presents an assessment of the range and effectiveness of interventions and approaches to increase the number of women on boards.
• The appointment process i.e. how women get access to boards.Whilst there is recognition that the appointment process in itself has a key role to play in the resulting number of women in the boardroom, the research base is limited (Dutton and Raeside, 2014).
• Evidence specific to Scotland i.e. whether and/or how the Scottish context potentially impacts on the approach to be taken.Whilst there is recognition that any interventions and supports to increase the number of women on corporate boards need to be tailored to accommodate the operating and policy context (Vinnicombe et al., 2015), there is no existing research that relates superficially to Scotland. In 2014, there were just over 335,000 private sector enterprises operating in Scotland.98% of enterprises in Scotland are small, accounting for 329,000.However, these companies account for just 33% of employment and 23% of turnover.In contrast, large enterprise (i.e. those with 250 or more employees) account for less than 1% of all enterprises but 57% of employment and 64% of employment.
• Other under-represented groups on boards as set out in the Equality Act 2010 ^[4] .Although some of the issues faced by underrepresented groups are unique, there is potential for research focusing on women to identify common themes (Konrad, Prasad and Pringle, 2006).

This research aims to address some of these gaps.

Research Aims and Scope of Research

The aims of the research are to:

• Build on previous research to improve the evidence base on overcoming the barriers to diversity on corporate boards in Scotland.
• Inform the Scottish Government's approach to improving diversity on boards, with a focus on informing the development of the Partnership for Change commitment and the Scottish Business Pledge.

Whilst the main focus of the research has been on how to increase the representation of women on private sector boards, it has also examined the diversity of boards in terms of the other protected characteristics set out in the Equality Act 2010.

This study is part of a broader programme of work to improve gender equality and diversity, including programmes to give individuals insights into how boards operate and what is involved in being a board member, mentoring and peer support programmes and the introduction of the Scottish Business Pledge.

Research Methods

The research has involved:

• A review of the policy and academic literature.
• Interviews with key stakeholders including Scottish Government, Scottish Enterprise, Highlands and Islands Enterprise, Skills Development Scotland, Investors in People, key business representative organisations, the Equality and Human Rights Commission and a range of organisations and individuals with a particular interest in improving the gender balance of the workforce and/or private sector boards.
• An e-survey of private sector companies.55 companies with boards took part in the e-survey.
• Case studies with 10 private sector companies.These were selected to reflect a range of different experiences - including both companies that were actively seeking to improve the gender balance and broader diversity of their board and those that were not.

More detail on the research methodology is provided in Appendix 1.

Structure of Report

The report is organised as follows:

• Chapter 2 reviews the rationale for improving gender balance and board diversity.
• Chapter 3 examines the barriers to improving gender balance and board diversity.
• Chapter 4 sets out approaches to improving gender balance and board diversity.
• Chapter 5 sets out conclusions and recommendations.