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A diverse board is a safe board

In the wake of the global financial crisis, businesses and nations had to look seriously at corporate governance; what worked and what didn’t; why some institutions were so resilient and why others weren’t. One of the key themes which emerged is the phenomena of so-called “group think”.

In its attempt to tackle the scourge of “groupthink”, seemingly responsible for some of the riskiest financial behaviour, the Europe Union has recently legislated on proposals which will introduce for the first time a regulatory requirement to set gender targets for the management boards of significant institutions. What counts as a significant institution is still up for grabs in the consultation process but is likely to apply to the type of business whose failure has a considerable effect on the wider market. Underpinning the proposals is the notion that a diverse board can and should be used as a risk management tool (by ensuring that more than one perspective/view can prevail).

The last time this issue really hit the headlines was in 2011 when Lord Davies published his report “Women in the Boards” which charted the discrepancy between the number of woman in the workforce and their poor representation at board level. That report deliberately steered clear of suggesting compulsory quotas for women on the board but for a while, in its wake, there was a surge in the number of female appointments to the boards of the UK’s biggest companies. However, the latest figures demonstrate that in the last 6 months of 2012 the rate of appointments bottomed out, falling well below the level required to meet a target of 25% female representation by 2015.

We will need to wait and see how the government decides to enact the European Directive into UK law (which it must do by January 2019). For now, the hope is that the spectre of these quotas will force British business to seriously consider the place of women in the workplace and engage in meaningful discussion about instituting change.

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