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My Lords, it is always a great pleasure to participate in the debate which marks International Women’s Day and I thank the Minister for her introduction. I always learn so much from my colleagues in your Lordships’ House, who in different ways are supporting women in very different walks of life. My pleasure this year is tinged with sadness, in that we will miss hearing from the late Baroness Heyhoe Flint—a frequent and lively contributor on this topic, an inspirational role model as a world-class cricketer and, quite simply, a wonderful human being. I had the great pleasure to work with her in the run-up to the 2012 Olympics and her views on equality and sport were always challenging but always entirely authentic.
I am sorry to disappoint the noble Baroness, Lady Bottomley, because I am going to talk about women and boards—so she can go and have a cup of tea now, if she likes. Unlike her, I do not think we have done enough. It is now 24 years since I joined my first board as a non-executive director. For much of those intervening years, change was painfully slow. In the last six years, though, particularly since the publication of the Davies report, the atmosphere and composition of UK boards has been changing rapidly and very much for the better. By the end of 2016, we had achieved female board membership of over 26% in our largest companies, ahead of the target set in 2011, and approaching 20% for the FTSE 250.
This matters, not just because we need to harness the talents of all our workforce to be genuinely competitive in a global, and post-Brexit, economy, or because it is self-evidently the right thing to do to have leadership teams reflecting the kind of society they purport to serve. I would argue that, to make real progress, women must be deeply embedded at the highest level: in the key decisions around allocation of resources and in critical investment decisions, at a time when some of our hard-won rights have never been under more pressure, around determining culture and behaviours. Although that has always been a strong conviction of mine, I was heartened to see some empirical evidence to support this instinct. Among MSCI world index companies surveyed in 2015, two really interesting findings emerged.
First, companies that had strong female leadership reported a superior return on equity, a key business metric: 10% against 7.4% on an equal-weighted basis. That is pretty significant. Secondly, companies lacking board diversity tend to suffer more governance-related controversies—there is diplomatic language for you—than average. That absolutely chimes with my own observations over the years that women are far more inclined to speak up about what they regard as unacceptable remuneration proposals and far more inclined to take account of the consumer perspective. To me, return and reputation are two key drivers of value in a business and it was highly affirming to see that in those two areas the contribution of women appears to be making a real impact.
So, what has happened in the last six years that has made such a difference, and are we really at a tipping point rather than a plateau? I feel that four factors, as with most changes in public policy, have been at work here.
First, the Government have taken a clear philosophical lead about the changes they expect to see. The initial preference for key targets over explicit quotas was enough to incentivise most companies to wake up, smell the coffee and understand that this was, quite simply, their last chance to engage voluntarily.
Secondly, the time was simply right. There is a huge talent pool of able, experienced women, ready and willing—and, critically, expecting—to serve at the highest level in organisations. That has been one of the biggest single changes in my business life, together with the diversity of experience now on offer.
Thirdly, public opinion is aligned with this. In an era when our political leadership in the UK at many levels is female, where our academic leadership, our major not-for-profit organisations, our public bodies, our scientific and arts institutions—as the noble Baroness, Lady Bottomley, described—have all embraced diversity, big business simply looks right out of step.
Finally, there has been a range of key enablers supporting the change. For both companies and individual women, the wide range of support and practical help is impressive. That has come in the shape of campaigning groups such as the 300% Club, led by serious business players. I see the noble Baroness, Lady Goudie, who was a leading light in that, in her suffragette purple today. We see it in the kind of excellent programmes such as the FTSE Cross Company Mentoring programme or in the excellent training and networking work done by the great Women on Boards group. In Scotland, my own initiative, the Norton House Group, works with board-ready women, to prepare them for and support them through their first board appointment.
Of course, some firms in the search community have transformed their attitude to diversity. The very best consultants not only have extensive networks of able people from very diverse backgrounds, but are also increasingly challenging chairs and senior independent directors to reflect on the candidate briefs they develop, specifically to challenge unconscious bias. That is a great step forward.
The face of British business is therefore changing. I believe strongly that this is a tipping point and not a plateau. As with all major change, however, we need to keep up the pressure until the change is embedded and normalised, and that will take time, effort and vigilance. But the UK is already a leader now among those countries that do not impose quotas and, indeed, ahead of some countries that do so but do not back those with meaningful sanctions. It appears that the voluntary approach, so far, is working.
Two things will help further with this. I feel strongly that mature, well-resourced boards could easily create space for an additional non-executive director and reserve that place for someone for whom this is their first board role. This would at a stroke widen the pool enormously. Secondly, I think that all search firms operating in the FTSE should annually publish their candidate data to show how diverse their shortlists have been. This will give companies a real insight into which firms actually take this seriously and help inform their choice when appointing these firms in the future. I am very proud to have added my own footnote to all this change. I was very pleased to chair the first company in the FTSE with an all-female senior line-up. As chairman of Grainger plc, I appointed a female chief executive, a female finance director and a female senior independent director. I had a call from one of our major shareholders on his discovering this. He remarked, “All the top jobs are held by women, Margaret. How could this have happened?”. I had a very clear answer for him. I explained that we had simply hired the best people.