Increasing representation of women on private sector boards in Scotland

5. Conclusions and Recommendations

Conclusions

Research Aims

1.This research was commissioned by Scottish Government to better understand how the barriers to gender balance and broader diversity on private sector boards in Scotland can be overcome and to inform the Socttish Government's approach to tackling this issue, especially in relation to the Partnership for Change commitment and Scottish Business Pledge.In particular, as most of the available research focuses on listed companies (for example, on FTSE 100 and 250 companies in the UK), this study has focused on understanding the perspectives and approaches taken within the broader SME business base.

Rationale for Improving Gender Balance and Broader Diversity of Boards

2.Companies taking part in the research generally felt that equality and diversity were important principles but many felt that the composition of their board did not have an impact on their cmpany, how it is perceived and its perfromance - or did not know what impact it had.

• This is an important finding as the business benefits of a more gender balanced or diverse board are often used to make the case for taking action. If companies do not feel it has an impact - or they are not assessing whether or not it is having an impact - they are unlikely to be convinced by the "business benefits" argument.
• Companies with a more gender balanced board or that had increased the representation of women on their board in the last 5 years were more likely to say that they felt the board composition was having a positive impact on a number of different elements of their company - suggesting that once progress begins to be made on these issue the business benefits become clearer to companies.

Barriers t Imprving Gender Balance and Brader Diversity f Bards

3. The most commonly identified barrier to improving gender balance and broader diversity on private sector boards was the low turnover of board membership - reflecting the fact that most companies taking part were SMEs. This highlights that different approaches may be needed to drive change amongst SMEs compared to those taken in the larger, listed companies that have been the focus of most previous research.

4. In terms of barriers that were specific to gender, the main issues highlighted by companies were:

• A lack of female candidates coming forward for board positions.
• Female candidates lack the skills and experience required.
• Care must however be taken around interpreting these findings as other research has demonstrated that these issues are often more complex than initially observed. For example, a particular issue around the lack of skills and experience is whether the specification set for boards is too narrow and focused on skills and experience that are more likely to be held by men than women.

5. Many of the companies that participated in the research felt that there were no barriers to improving the gender balance of their board. However, the disparity in board membership (with only 31% of Scottish company directors being female and only 49% Scottish companies having at least one female director) suggests this cannot be the case.

Approaches to Improving Gender Balance and Broader Diversity of Boards

6.There is limited evidence f cmpanies adpting a cmprehensive apprach t imprving the gender balance and brader diversity f their bards:

• 29% of companies completing the e-survey had no policies or processes in place - and amongst those that had taken action this was generally limited in its scope.
• Where companies were taking action, this was most commonly focused on developing the pipeline - for example, through mentoring, peer support or training - with very limited evidence of companies changing recruitment procedures, setting targets for board membership or reporting on progress in a systematic way.

7. Commitment by the Board and/or Chief Executive to improving the gender balance of the board was considered to be most useful in helping improve the gender balance of boards. This suggests that securing the commitment of these key individuals within a company is a critical first step in the process.

8. Companies that had more gender equal boards were more likely to state that having policies and processes in place to improve board and staff understanding of equality, diversity and potential bias had been important in helping them improve the gender balance of their board than those with fewer women on the board. In other words, developing understanding and awareness of the issues can help act as a prompt to further action.

9. There is limited evidence of companies taking action to tackle the underrepresentation of individuals with other protected characteristics (e.g. those with disabilities, from ethnic minority communities, etc.).

10. Only half of the case study companies had used an external support service to help them improve the gender balance or broader diversity of their workforce. A key issue here is a lack of awareness of what is available.

11. The aim of the study was not to identify "best practice‟ - but instead to understand the views of Scottish companies on this issue and what action, if any, they were taking to tackling the underrepresentation of women and other groups on their boards. This evidence should be considered alongside other research that has been undertaken with leading edge companies that are developing innovative approaches to tackling this issue.

Recommendations

1. Many companies felt that improving the gender balance or broader diversity of their board was not an important issue for them. More work is needed to raise awareness of the importance and benefits of a diverse board. Scottish Government can play a key role here - both directly and indirectly through its economic and business development agencies and by encouraging other partners to raise the issue.

• Whilst the equalities argument is important in principle, the challenge is that many companies feel they "treat everyone equally‟ and therefore that no action is needed. As such, arguments around the impact gender balance and broader 73 diversity has on board effectiveness and business performance are likely to be more compelling.
• The target audience for these messages should be board members and Chief Executives - as the research found that a commitment by these groups was critical to making progress on this issue. Scottish Government should work with those organisations and agencies that have strong links to these groups - such as Confederation of British Industry ( CBI), Institute of Directors ( IoD), Scottish Chambers of Commerce and Scottish Council for Development and Industry ( SCDI). In addition, consideration should be given to how these messages can be incorporated in the Scottish Business Pledge.
• These messages are likely to be most effective if they are built into mainstream business development supports (such as Business Gateway, Scottish Enterprise, Highlands and Islands Enterprise and Investors in People) - as this helps reinforce the key message that this is a key part of ensuring the business has the resources available to achieve its goals and aspirations. Scottish Government should work with these agencies to identify how to embed these messages into their approach.
• Scottish Government and their agencies also have the potential to use public sector procurement to prompt companies to think about their board composition - although any approach must comply with legislation. Research ^[21] has found that this has been an effective approach to getting companies to change their practices in relation to other policy areas (such as recruiting disadvantaged young people). Scottish Government should issue guidance to public agencies on how the issue of board diversity could be incorporated into procurement, including giving examples of good practice.

2. However, it will not be sufficient to increase awareness of the issue amongst companies. Companies must also be able to get practical information, advice and support to understand the changes that are needed to their policies, practices and culture and how best to implement these:

• A number of initiatives and programmes are already in place to support companies to improve the gender balance and broader diversity of their boards. There is a need for:
• Greater promotion of this provision. As an initial step, Scottish Government could include linkages to relevant provision through their webpages on Partnership for Change and the Scottish Business Pledge.
• Scottish Government should undertake an assessment of whether there are any gaps or overlaps in provision and develop a plan about how these can be addressed.
• Scottish Government should work with its partners (including business representative organisations and business support services) to ensure that a range of information and tools - such as checklists and good practice guides - are available for companies.
• Scottish Government should also explore how it could help facilitate learning and knowledge exchange between and within the public, private and third sectors on their experiences of how to improve board diversity.

3. Two key barriers to improving gender balance of boards are the lack of female candidates and the perception that female candidates that do come forward lack the skills and expertise required. This is likely to also be the case for other protected characteristics (such as race or sexual orientation). As outlined earlier in the report, the factors underpinning these are complex meaning action is needed across a number of areas:

• Ensuring sponsorship, mentoring, peer support and training is available to women and those in other underrepresented groups (including those with disabilities, from ethnic minority and LGBT communities) in senior management roles. This should be targeted specifically at helping them develop the skills, experience and credibility to move into board positions. There is also a need for provision of this type for those earlier in their careers to help ensure they reach senior management roles and develop aspirations for board membership. This will require action from across industry, business representative organisations and the public sector.
• Ensuring that policies in other areas support women and other underrepresented groups reach senior management roles. This includes policies in relation to childcare and flexible working and ensuring that schools, colleges, universities and careers advisors are encouraging young people to consider the widest range of career choices and aspirations.
• Many case studies companies felt that the most important factor in selecting board members was to get the "right person for job‟. However, there is a risk here that there is unconscious bias in what companies consider to be "right‟ - and that this is excluding women and individuals from other underrepresented groups from being considered. Action is needed to challenge unconscious bias. Whilst unconscious bias training is a key element of this, this is likely to only be taken up by companies that are aware of its presence - and therefore consideration should be given to how tackling assumptions and practices can be built into other provision. Scottish Government should consider how they could best support this to happen.

4. Another key barrier to increasing the gender balance and broader diversity of boards is the low turnover of board members - especially in SMEs and family-owned companies. As a result, the actions outlined above should be focused on those firms with a regular turnover of board membership - at least in the early stages - as these are the companies where there is the greatest potential to deliver change. Success amongst these companies can then be used to encourage other companies to consider tackling this issue. However, it should be noted here that identifying companies with regular board turnover is, in itself, a challenging task.