While executive boards have made strides in diversity in the last few decades, their non-executive counterparts need a shake-up, according to Nick Stephens, Executive Chairman of life sciences search firm RSA.
“Non-executive directors seem to stick for a long time,” he said, despite corporate codes mandating a team change every two to three years.
“If you look around the global life science community, probably half of boards are past the six-year point. So how are companies getting fresh opinion when the same small group of people is being reappointed time after time?”
When changes are eventually made, replacements are drawn from a small pool of overwhelmingly older white men out of a mistaken sense that these choices are safer, said RSA’s chairman.
“I don’t think it’s collusion – it’s a false approach to risk minimisation.”
While substituting like for like may seem like a low risk decision, it’s diversity and fresh thinking that bring value to shareholders, said Stephens. “There’s piles of evidence that boards with women on them outperform boards without women on them.”
Although the benefits of women on boards are now a truism, disturbing this “comfortable club” is not easy despite some recent gains, Stephens believes.
Life science industries have seen female non-executives on boards rise a third – from 12% in 2012 to 16% this year, according to RSA’s own surveys.
But the progress may only be superficial, Stephens told us, as companies are rotating a small pool of women candidates: “You look behind it and it’s all the same women getting board positions.”
The problem with quotas
But the Chairman thinks the answer cannot be reduced to quotas. “I think you should use the threat of a quota to force change,” but they can backfire because they make people think there are not enough suitable women candidates, he told us.
“Quotas make it look like a supply problem, but it’s a demand problem. We need to increase demand.”
These targets artificially drive up demand for women candidates but at the risk that board members will pay only tokenistic “lip service” to women’s inclusion, he said.
“The risk is during the comfort break in the meeting, all the men walk into one room, all the women walk into another room, and the men make the decision with their flies undone.”
Stephens said RSA has been encouraging clients hiring its search services to specify that they would like some women on their shortlists – but not to the extent of all-women lists.
Another way to increase equality is to “actively manage” the board with the help of an external person – such as a recruitment firm, he admitted – who can look for missing skills and “make the decision, when two candidates are equally qualified and motivated, to preferentially hire women.”