Davies Report: last chance saloon for UK boards

Lord Davies’ recommendations may not have gone as far as some European countries and introduced formal quotas for the FTSE 350, but make no mistake – the report has teeth.

The recommendations allow companies to set their own targets for women on their boards for 2013 and 2015. Chairmen will be mandated to make these public by September of this year. While it is up to individual boards to set their own percentage aims, the recommendation is for FTSE 100 companies to target 25 per cent female boards by 2015.

While allowing individual boards to remain autonomous in their decisions about the inclusion of women at the top, they can no longer ignore the issue. Disclosure of the proportion of women at board, executive committee and company levels is to be included from 2012 in a company’s corporate governance statement.

Recognising the part headhunters play in presenting balanced candidate lists for board positions, they are invited to draw up a voluntary code of conduct addressing gender diversity and best practice. There is specific mention of drawing directors from untapped sources including entrepreneurs, academics, civil servants and senior women with professional service backgrounds.

Shareholders are also identified as being stakeholders with influence to apply. Institutional investors may well include diversity as a key marker alongside measures such as corporate and social responsibility.

The general statements offer little change from previous reports. Both Derek Higgs’ 2003 review of the role and effectiveness of non-executive directors and the Tyson Report on the recruitment and development of non-executive directors urged boards to appoint directors from a broader talent pool, and suggested they should set targets. However, Lord Davies has introduced a specific timetable and compulsory reporting into the equation. Moreover, he recommends his steering committee meet every six months to review progress and report on it annually. It will be harder for those companies (52.4 per cent of the FTSE 250) that currently have no women on their boards to continue to appoint men to new board positions without explaining their actions.

Will it be enough? Nicola Horlick, the investment fund manager, has come out in favour of quotas. She says:

“Generally, I do not favour positive discrimination … however, our public companies show no desire to be more inclusive of women and so I see no choice other than to push them in that direction.”

Anna Ford, the former UK broadcaster who is a non-executive director of J Sainsbury, the food retailer, and N Brown, the home shopping retailer, is another for whom Lord Davies has not gone far enough. She told the FT yesterday:

“I’m now completely in favour of quotas.”

But generally, the tide of opinion in corporate Britain is with Lord Davies. Just 11 per cent of the 2,600 bodies that made submissions to his review were in favour of quotas.

So what do you think? Missed opportunity or a brave move in the right direction?

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