Diversity Works, So Start Paying for It
In the UK, the Davies Review, which focused on the task of improving the gender balance on the boards of Britain’s biggest companies, has moved the dial considerably. Around 12 percent of board members amongst FTSE 100 companies were female in 2011, by 2015 that figure had risen to 26 percent. The figure today is 29%1.
To top that, our UK CEO Value Index research showed in June 2016 that more than 35% of the largest 150 UK companies have a female remuneration committee chair.
As we said then, we were used to the fact that the ‘new normal’ was a powerful female chair of the remuneration committee (‘remco’) tackling the challenging issues surrounding executive pay.
We even went as far as proposing that the efficiency of a female chaired remco was greater than its male counterpart, measured in terms of our CEO Value Index.
The answer was interesting: companies with female remco chairs consistently outperformed those with male counterparts in our Index.
Now we have something else to add into that mix. The London Office surveyed 250 companies on Diversity and Inclusivity (D&I) and found that 53% set ‘closing the pay gap’ as amongst the highest priority or an important priority, 62% set gender pay equity, and 66% set D&I as a priority.
This isn’t necessarily action, but nor is it irrelevant. Uber will use specific diversity targets to determine CEO bonus from now on, Microsoft and Intel use diversity goals amongst 50% of their executive bonus metrics, and Johnson & Johnson and Facebook reward both employees and executives for hitting specific goals tied to diversity and inclusivity. At the same time, over 65% of the companies we surveyed had an individual who has been designated responsible for diversity and inclusivity.
The not-so-good news is that only about a third of those surveyed measure D&I outcomes or provide training. Similarly, only one third of those surveyed report actions to increase diversity when recruiting new hires, and less than one quarter take action to increase diversity when promoting employees. Perhaps most damningly, only 14% of organisations report a formal process to increase female representation in management and/or executive positions, despite the fact that only 29% of executive, senior level, and managerial positions are held by women. This, more than anything, drives the ‘gender pay gap’.
Not to put too fine a point on it:
“Whatever women do they must do twice as well as men to be thought half as good. Luckily, this is not difficult”2
1 Women are now in 29% of directors' seats on FTSE 100 boards, up from 27.7% in October 2017 because companies recruited more female non-executive directors; 264 women now hold 305 FTSE 100 directorships
2 Charlotte Whitton, first female Mayor of the City of Ottowa