Increasing representation of women on private sector boards in Scotland

3. Barriers to Improving Gender Balance and Broader Diversity of Boards

Intoduction

As outlined in Chapter 1, in 2014:

• 31% of Scottish company directors were female.
• 49% of Scottish companies had at least one female director.

These statistics demonstrate the extent to which women are underrepresented within board directors. However, there is no robust data on the processes that underpin these outcomes.For example, data is not available on:

• The number of board positions that become available each year - and how many of these are advertised.
• The number of women applying for board positions.
• The success rate of female applications and how this compares to that for male applicants.

In addition, data is not available on the numbers of individuals from other protected characteristics on boards.

Although the strength of the evidence base varies, research into increasing the diversity on boards (Sealy, Doldor and Vinnicombe, 2009) suggests that the key barriers that underpin the underrepresentation of women on private sector boards are generally categorised as:

• Individual characteristics - with the arguments commonly made being that women and other underrepresented groups either do not aspire to board membership or lack the skills and experience to gain a board position.However, Sealy et al. were unable to find any robust evidence to support these suggesting that they are unfounded.Furthermore, they highlighted that the narrative around women 'choosing' to leave corporate life at senior management level that accompanies these fails to recognise other barriers women face.
• Interpersonal characteristics - with women and other underrepresented groups generally thought to have more limited social networks and board culture being unable to accommodate diversity, making it more difficult for women and other underrepresented groups to integrate.
• The recruitment and appointment process - with a lack of awareness of available directorships, limited links between search agencies and underrepresented groups, a lack of diversity on nomination committees, unclear selection criteria, unconscious bias and the language and framing of directorships all acting as barriers to women and other underrepresented groups gaining board positions.

In this chapter, we will examine the barriers faced by the companies taking part in the e-survey and case studies to improving gender balance and broader diversity of their boards - and how they impact on attempts to improve gender balance and broader diversity of private sector boards.

The e-survey provides a useful starting point for the consideration of the barriers identified in the field work. The e-survey asked companies to identify barriers to achieving gender balance and greater diversity.

Figure 3: Main Barriers to Achieving Gender Balance on Boards (% of Companies)

	All companies	Female account for less than 40% of board	Female account for 40%+ of board	No. of female board members increased in last 5 years
Low turnover of board members	42	56	15	32
Lack of female candidates for board positions	34	40	23	42
No barriers to achieving gender parity	32	24	46	37
Receive female applicants for board positions - but do not have the industry-specific skills or experience we require	16	16	15	32
Other	13	12	15	11
Concerns that targeting females would be in breach of legislation	5	8		5
Don't know	5	4	8	5
Receive female applicants for board positions - but do not have previous board experience	3	4	-	5
Don't know where to get help to tackle this issue	3	-	8	-
Can conflict with other organisational priorities/objectives	-	-	-	-
N	38	25	13	19

Source: TERU E-survey (2015)

38 companies identified barriers:

• The most frequently cited barrier (by 42% of companies) is the low turnover of board members.This is not gender specific, but impacts on all board recruitment and limits the number of opportunities available.Companies where females account for less than 40% of the board were much more likely to identify this as the main barrier than those with a more equal gender balance (56% compared to just 15%).
• The next most commonly cited was a lack of female candidates coming forward for board positions (by 34% of companies).Again, companies where females account for less than 40% of the board were more likely to identify this as the main barrier than those with more equal gender balance (40% vs. 23%).Interestingly, companies that had increased the number of female board members in the last 5 years were slightly more likely than all companies to identify this as a barrier.
• 32% of companies felt there were no barriers to achieving gender equality.A higher proportion of those companies with boards that are at least 40% female felt there were no barriers than those with fewer women (46% compared to 24%).
• Only a small proportion of companies said that female applicants lack the necessary skills and or experience they require (with 16% saying females lack the industry-specific skills or experience needed and 3% saying female candidates lack board experience).
• Concerns that targeting females would be in breach of legislation and a lack of knowledge about where to get help to address this issue were only highlighted by a small proportion of companies.
• A small number of respondents suggested other issues.These included:
• Achieving board gender parity is not a key focus - with other issues taking priority.
• Boards with odd numbers of board members will never be equally balanced.
• The company is keen to achieve a diverse board but focusing on achieving diversity in other characteristics (such as different nationalities, knowledge, experience, etc.) rather than gender.

We will now consider each of these barriers in more detail, drawing on the stakeholder and case study interviews as well as the wider literature.

Low Turnover

As highlighted above, the issue of low turnover is not gender specific but clearly has an impact on the potential to change the composition of boards and this could limit companies being more proactive about making their boards more diverse.A number of case study companies also identified that low turnover was a significant barrier - especially amongst those that were small, family-owned businesses.The case below is an example of this situation.

Case Study Examples: Low Turnover as a Barrier

Case Study E's board is unlikely to increase substantially in the future or change in terms of gender balance as it is a family owned firm and so achieving gender balance at board level is not seen as an important issue within the company. However, it is important that all employees are treated equally and they have an equal opportunities policy in place to ensure this happens. For example, the Equal Opportunities Policy states that the company is 'committed to a policy of treating all our employees and job applicants equally.' They do not support positive discrimination and would never make a promotion or recruitment decision based purely on gender or other characteristics; it is more important they find the right person for the job.The Equal Opportunities Policy states that 'we will appoint, train, develop and promote on the basis of merit and ability alone'.

Lack of Female Candidates

The next most common barrier identified in the survey is a lack of female candidates for board positions. This study has found that there are a range of reasons why women do not put themselves forward for board positions - and these confirm many of the findings of previous research undertake at the UK level or internationally.

Differences in Aspiration

The evidence from the literature is mixed in terms of whether there are differences in aspiration across genders.For example:

• As outlined earlier, research by Sealy et al. (2009) was unable to find any robust evidence to support the argument that women are less aspirational.
• Research by Rosati and Bailey (2014) into the talent pipeline surveyed over 600 business directors and senior executives across several countries.Only 5% felt that the low number of female applications and/or a lack of desire for taking up board positions was the main reason for women being underrepresented on boards.
• Research into board membership (Brown, Kelan and Humbert, 2015) found that:
• Men are more likely to consider a wider range of boards than women seeking non-executive directorships with 58% considering private company boards compared to 49% of women, 53% considering public limited company boards outside of the FTSE compared to 40% of women, and 14% considering angel investment in small companies compared to 5% of women.
• Whilst women are more likely to aspire to a non-executive directorship on a FTSE100 company (31% versus just 14% men), men were more likely to identify the power and/or status they might gain from the role and highlighted their desire to be Chair (46% versus 28%).

As well as there being some debate about whether women have different aspirations, there is also a body of research that seeks to explore what might underpin different aspirations.In a recent study, KPMG, YSC and 30% Club (2014) found that men and women have more similarities than differences but " the marginal differences appear to predict markedly dissimilar career outcomes for men and for women". In particular they found that:

• Women's ambition overtakes that of men as they reach more senior roles.For both men and women the factors that they considered more important to their sense of success were having positive working relationships and doing something intrinsically interesting.
• Women at senior levels (one and two levels below Executive Committee) are two times less likely to be internally promoted than men - but four times less likely to leave than men.At Executive Committee level, women were much more likely than men (25% vs. 12%) to leave because they had become disengaged with the company culture.This suggests that women have aspirations - but that culture and systems make board-level positions less attractive.

Some stakeholders felt that there is a perception that women do not have aspirations to become board members - although in line with the literature they had mixed views about whether or not this was an accurate perception and that the reasons why women tended to be less likely to aspire to a board position were not clear. Lack of female aspirations to go onto a board was also highlighted by some interviewees from the case study companies (speaking either on behalf of their company or from their individual perspective).As with stakeholders, it should be noted this is just one of barriers noted.

Interviews with potential board members from the case study companies (shown in the box below) suggest that some of the women interviewed are not considering boards not because they lack confidence or aspiration but because they have family/other caring commitments and could not put in the additional hours they perceived board membership would require. This would tend to support the views of stakeholders that there are differences in what people want out of life and currently more women prioritise life outside work. These perspectives are highlighted in the box below. To protect the identity of the interviewees we have not organised these findings by case study.

Examples from Interviews with Existing and Potential Board Members: Different Aspirations as a Barrier

One interviewee had been interested in being a board member earlier in her career but now did not think it was realistic because she has caring responsibilities and these have changed her priorities as well as limited the time she feels she would need to devote to being a board member. She perceives that board members have to work long hours and she is not able to work more than full time hours. She does not believe that she faces other barriers as she feels she has the skills and abilities to be a board member.

Another interviewee is in a senior position in her company. She is not thinking about a board position at the moment because she is at an early stage in her career, but did think that it was something that she might potentially consider 'further down the line'. She feels the main obstacles to achieving this included how she might be able to balance the demanding role of a board member with family life.

On the other hand, an interviewee did not see that having commitments for caring for children should act as a barrier to board membership in the longer term. This indicates that it may be important to provide opportunities for women to increase their hours after they have raised their children.This interviewee is in a senior position in her company. She is interested in becoming a board member because she is ambitious and also sees herself working for at least another thirty years. At the moment she has a dual focus on her family and career and is working part time.However, as her children grow she feels she will have a stronger focus on her career again and will increase her hours. She feels she has the skills and abilities that would be valued on a board including her knowledge, conflict resolution and human relations. She does not feel that she faces any barriers due to gender, especially in her own company as there is a female MD. Indeed the company is ' led by strong successful women'.

These perspectives are also identified in the literature which shows that women often leave corporate life at a middle management level for a range of reasons that include (Rosati and Bailey, 2013):

• Family responsibilities including limited flexibility and the cost of childcare.
• No desire to engage in workplace politics.
• Other external commitments that require their time.
• No desire to combine work pressure with home life.
• Lack of appeal of corporate life.

In terms of tackling these issues, the main suggestions given were:

• Enabling flexible working.
• Improving culture in workplace.
• More transparent recruitment processes.

Women were much more likely than men to see 'unconscious bias' training as a key initiative that could reduce the levels of attrition of females from middle to senior management (25 % compared to 5%).

Male-Dominated Culture

Linked to the above is the perception of the existence of a male-dominated corporate culture. In one study highlighted in the literature this was the most frequently cited reason to explain why women are under-represented at board level (recognised by 25% of women and 22% of men (Rosati and Bailey, 2013).

Stakeholders perceived that cultures of organisations can be male-dominated. It is difficult in such a context to get board members to make a cultural shift and take the issue of increasing diversity on board.Additionally, some stakeholders felt men in male-dominated boards have a vested interest in maintaining the imbalance. As one stakeholder commented although there is a need to aim for wider diversity on boards having a balance of males and females is a good starting point. If companies lack gender diversity this is likely to reflect deeper cultural issues in the company concerning diversity in general.Stakeholders also thought that in male-dominated boards it is likely that females on boards will have very similar backgrounds to the men they sit with and will be unlikely to think that differently from the male board members.' Lots of companies 'tick boxes' but we can't just have someone conditioned to a male dominated environment.'

A small number of people interviewed for the case studies identified that the continued male dominance of boards could act as a barrier to women and prevent them putting themselves forward for board positions. For example one interviewee felt that despite some progress, boards continue to be male dominated and would prefer to recruit other males although she pointed out ' this is my perception, it might not be reality'.Two other interviewees' views on this issue are highlighted in the box below.

Examples from Interviews with Existing and Potential Board Members: Male-Dominated Culture as a Barrier

A female board member interviewed had applied for board positions in the past but felt her young age, lack of experience in the private sector (she had been on the board of a couple of charities) and to an extent 'the old school tie network' prevented her being recruited. This was frustrating. There appeared to be 'no buy-in to diversity at the top level' and in some cases the 'board was seen as a social club with resistance to opening it wider'.

An interviewee was in her second job since leaving university.Although she felt she would like to progress to higher levels of management and saw opportunities for progression within the company, she was unsure whether she wanted to become a board member at some point in the future. The main reason for this was that she enjoyed an operational role and she saw board members as being remote from this. Another reason was that her perception of boardrooms was that they were 'rooms full of men'. She had not had any experience of meeting female board members. At university, all guest speakers at her course had been male, despite the fact that the majority of students on the course were female.As a result being on a board did not appeal to her as she felt they would be male dominated.

If boards are dominated by one group this can limit the networks they use to recruit so they tend to recruit people who have their own characteristics and this can become self perpetuating (referred to as " hiring in ones' own image" in Sealy et al., 2009).

Limited Networks

The literature including Sealy et al. (2009) and Rosati and Bailey (2014)identifies that success in securing a role often relates to the scope of an individuals' network. Women typically have smaller networks than their male counterparts so this may hamper their chances of being aware of and/or securing a board position. Stakeholders agreed that women have more limited networks than males and therefore do not have access to support. There needs to be more emphasis on building social capital so that women have these links.

Another issue is a lack of awareness of the roles on offer in boards coupled with unclear selection procedures which can serve as a major obstacle to appointment (Sealy et al., 2009).This was also an issue raised in the case study interviews, with several of the interviewees with potential to be board members not sure about where to find board vacancies, or the processes involved in appointing board members. Some said they felt they would need support to identify vacancies and how to apply.

Lack of Skills and/or Experience

The next most common barrier identified in the e-survey is that women lack the necessary skills and/or experience needed for board membership. This was also raised as an issue in the case studies. This was often the main difference between male and female candidates for board positions.

Case Study Examples: Lack of Skills and/or Experience as a Barrier

Case Study A identifies the main barrier is the lack of female candidates for board positions. Furthermore if they receive applications, candidates do not have the industry specific experience they are looking for. The company believes a more proactive approach is needed both internally and across the sector industry (banking) to help women attain and sustain executive positions so they can develop the necessary experience and to encourage them to seek board positions, especially non-executive positions. Proactive approaches they have implemented or are considering include commitment from the board to seeking diversity and producing a board diversity policy and taking steps to reach potential female applicants through targeted recruitment.

Case Study H also identifies finding female potential board members as the main barrier to achieving gender balance. This is a problem across their industrial sector (food manufacturing) as there are generally fewer females in management and board positions. Within the industry, there is a need to encourage more women to think about aspiring to boards and to think about this earlier in their careers. In their experience, women are less likely to put themselves forward for board positions as they are more likely to question their ability to do the job compared to males. They need encouragement to consider going for a board position. They have tried to recruit more female board members in the last 5 years but despite a lengthy process to try to find female candidates, involving the use of executive search agencies they have had few coming forward and male candidates have generally had more skills and experience. They would like to see more female candidates applying for board positions, but feel that this may mean they do not get the skills and breadth of experience they need for their board. The issue is a circular one: having more women on the board could enhance their reputation in the recruitment market place which might in turn attract more women looking for a management position as they would see that there is a possibility for promotion.

The issue of what kinds of skills and experience boards are looking for is important. While the case study companies recognised that women could bring new skills and ways of working to boards (around team building, problem solving, ability to look at issues from different perspectives etc.), very few were actively looking for these skills on their board. The literature suggest that a desire to maintain the status quo remains a barrier, particularly for male dominated boards that simply do not recognise the need for change and tend to replace like for like (Rosati and Bailey, 2013).

A number of stakeholders also commented that some companies are willing to look beyond a narrow person specification for board members. For example, one commented that when they say they are looking ' for the right person for the job they are looking at that through a very traditional lens' and do not understand that ' good comes in many forms' and broaden their definition of this. This can be self-perpetuating as women and people from other groups may not want to go on to a board where people like them are in the minority, perceiving this could affect the likelihood of them being able to make a contribution to the board.This reinforces many of the findings from previous studies including Sealy et al. (2009).Boards like this may not have many people from protected characteristics applying for positions but may not ask themselves why. Such boards may also not seek to change the way their boards operate to accommodate diversity. The working patterns demanded alongside board membership can be difficult for women to meet. According to the stakeholders this means there is a link between the number of female candidates coming forward for board positions and the barrier related to female applicants lacking the necessary skills and or experience required for board membership.

Workplace constraints can mean people in protected groups face discrimination in the workplace and find it hard to progress into senior positions and then boards.The Davies Report (2014) identified these as including, unconscious bias, organisational culture and approaches to performance management. Other workplace constraints identified in the literature include gender biased recruitment (potentially unconscious) and challenges in making progress on returning following a career break (Rosati and Bailey, 2013). There continue to be barriers preventing women getting into senior management positions and then building their experience so that they are in a better position to be successful in applications for board positions.

No Barriers?

12 companies in the e-survey stated there were no barriers to achieving gender equality on boards within their company. Similarly, some of the case study companies also felt there were no barriers. This did not mean they felt there were no barriers for particular groups within society but rather that they felt there were none within their company. This was because:

• People are appointed purely on basis of skills and expertise - although as highlighted in other literature this fails to recognise that there may be wider barriers that lead to women not developing the skills or expertise being sought.
• The company was determined to support gender equality and diversity.

Examples of these two different company perspectives are highlighted in the box below.

Case Study Examples: No Barriers

Case Study B sees equality and diversity as very important to the company. The owner is female and wants to lead by example. If the company grows and they increase the size of their board they will aim for gender parity to achieve this balanced perspective. They are very committed to achieving this and believe there are no barriers as they have put a number of policies and practices in place to ensure this happens.These include the development of an equalities and diversity policy, becoming an Investors in People employer, signing up to Partnership For Change, ensuring informal practices do not perpetuate gender imbalance, changing the gender profile of the business so that there are more women in senior management and introducing flexible working.

Case Study C feels there are no barriers to progression onto their board for females as long as they have the right skills and attitudes to attain a board position. If they have these skills and abilities they will be supported along a pathway to becoming a partner.However, the company has found it difficult to find females who are willing to take advantage of these opportunities. In their experience some female employees can have different priorities and this usually involves greater commitment to family life, which can interfere with the full time commitment to the firm needed to become a board member, which has always been expected of potential board members in the company. There is a 'reasonable expectation that as a female employed here that you have to have commitment to the firm and can't [take time off work or work part-time to] bring up children as you like - but this applies to everyone that wants to go on to the board'.The main challenge for the firm in terms of increasing female board members is the small number of women within the company who are willing to make this commitment.

Key Messages

1.The literature suggests the main barriers to improving the gender balance and broader diversity of private sector boards can be categorised as:

• Individual characteristics including different aspirations about board membership and a lack of relevant skills and experience.However, there is mixed evidence in relation to this - and many researchers criticise this perspective as it places the emphasis on women rather than on changing the broader organisational and cultural issues that influence women's decisions.
• Interpersonal characteristics including more limited social networks and board culture being unable to accommodate diversity - making it difficult for women and other underrepresented groups to integrate.
• Appointment and recruitment processes with, for example, a lack of diversity on nomination committees, unclear selection criteria, unconscious bias and the language and framing of directorships all acting as barriers to women and other underrepresented groups gaining board positions.

2.However, the findings of the e-survey show quite a different picture:

• The most common barrier to achieving gender balance on their board highlighted was the low turnover of board membership - reflecting the fact that most companies completing the survey were small and medium-sized enterprises ( SMEs) and many were family-owned companies (whereas most earlier research has focused on larger, listed companies).
• Just under a third of companies felt that there were no barriers to improving the gender balance of their boards.Boards that were more equal were more likely to think this was the case.
• Where companies did identify a barrier that specifically related to gender, the most commonly mentioned were a lack of female candidates coming forward for board positions and that female candidates lack the industry-specific skills and experience required.

3.The case studies and stakeholder interviews provide further insights into these barriers:

• The lack of female candidates is thought to reflect differences in aspirations across genders (with many of the 'potential board members' interviewed for this research feeling that board positions were not for them), perceptions that boards are a 'male-dominated culture' where they may not fit in and more limited social networks amongst women.
• The major factors underpinning the lack of skills and experience amongst female candidates are the lack of women in senior management roles and time out of the labour market due to caring responsibilities which limits the volume of experience women have accrued compared to men.A further consideration is the type of skills and experience companies are looking for - with some consultees raising concerns that these are too narrow.The concern here is that there is unconscious bias amongst the often cited focus on getting 'the right person for the job'.

4.One of the most notable findings is that many of the companies that participated in the research felt that there were no barriers to improving the gender balance of their board - but the low proportion of boards with gender parity and the evidence from other literature suggest that at a broader societal level there are barriers. In addition, many of barriers that were identified related to the choices women make in the labour market (for example, around career choice, whether to remain in work after having children, etc.).It is important to recognise that these are influenced by wider organisational, structural and cultural barriers and unless there is wider recognition of these (and action to address them) it will be difficult to make sustainable inroads into tackling this issue.