A transatlantic drive for equality

At the top of the Bloomberg Tower in Manhattan, in a crowded room overlooking Central Park, Helena Morrissey said something she has said many times before: “We need more women in leadership roles.”

The message is one she has repeated frequently since launching the UK’s 30% Club, which seeks to raise the proportion of board directors who are women to at least 30 per cent by 2015. This time, however, Ms Morrissey had a new audience in a new country – the US.

“This is a business issue, not a women’s issue,” she told the crowd of mostly women, gathered to launch a US 30% Club. “It’s about trying to make a different business culture where more people can thrive. It’s an economic imperative.”

About 20 per cent of board and “C-suite” positions – such as chief executive and chief financial officer – are held by women in the US. But that is just 5 percentage points higher than 10 years ago, according to BoardEx, a data provider.

Every year more women are appointed to top corporate positions. But at the current rate of change, it will take more than 60 years for the genders to be balanced.

Proponents of the group say gender diversity can help a company understand its customers and workforce, reduce the potential for groupthink, and increase share prices. Yet low representation of women at the top remains a global phenomenon.

Ms Morrissey, who is also chief executive of investment manager Newton in London, says it is no longer a question of why companies need to promote women, but how it can be achieved.

The UK club launched in 2010. Since then the country has seen steady progress, thanks to a range of factors, including the club’s advocacy. The number of female chief executives has remained low. Yet the percentage of women board directors has jumped from a static 12.5 per cent in 2010 to 21.6 per cent, as of May, according to BoardWatch, which tracks boardroom gender diversity in the UK.

Determined to see the same progress elsewhere, the club has launched new chapters overseas, including in Hong Kong, and also plans to set up in Australia, South Africa and Canada.

Launched in April, the US chapter has the support of billionaire investor Warren Buffett and other heavyweights, including Dominic Barton, global managing director of McKinsey, and Larry Fink, chief executive of BlackRock.

Whereas the UK club only focused on board composition, the US club broadened its goal to fill 30 per cent of all senior positions with women, with a special emphasis on developing the female talent pipeline.

Using the same methods as in the UK, the club plans to encourage shareholders to pressure companies to promote women and will broadcast any public commitments companies make.

US companies arguably have a stronger pipeline of women in middle management roles to promote. Nevertheless, the US will have its own set of challenges, Ms Morrissey says.

“I don’t want the impression to be that I think this will be easy, because I don’t,” she says, adding that the club faced “huge scepticism” initially in the UK.

“I had many harsh rejections from company chairmen and a number of leading business women here were wary of getting involved.”

After Lloyds Banking Group made a public commitment that 40 per cent of its senior roles would be held by women by 2020, both men and women were hesitant to support the goal, says Fiona Cannon, Lloyds director of diversity and inclusion.

Women feared others would perceive their promotions on the basis of gender rather than on experience or talent. On the other hand, some men feared that they and their male peers could be hit by job losses determined by their sex.

At the club event in New York, Ms Cannon recalled how one man asked her how many men would no longer get jobs as a result of the programme. “I said, well if there’s a list, your name will be at the top of it. We’re trying to achieve a meritocratic organisation and, in fact, that’s good for everyone, not just women.”

As the US club gets going, Ms Morrissey says men’s participation seems lower in the US. Too often, she says, men are leaving the issue to women to sort out, creating a silo effect.

The US club is developing a steering committee, but the lobbying effort internationally has already gained the support of 20 big investors, including BlackRock, Pimco, HSBC Bank Pension Trust and JPMorgan Asset Management.

The investors plan to pressure companies to find ways to become more diverse and seek disclosures on targets and progress.

A handful of investment teams have now gone so far as to say they will not invest in a company if it has less than three women on its board. The Matterhorn Group, a unit of Morgan Stanley, has a “parity portfolio” that makes this demand, for instance.

“At the end of the day shareholders own these companies and the board works for them,” says Eve Ellis, a parity portfolio manager. “We believe women are ‘leaning in’ already but that male board leaders need to move over.”

According to research by Catalyst, companies with more women board directors generated a 53 per cent better return on equity, 42 per cent higher return on sales and a 66 per cent better return on invested capital.

Much of the UK’s progress came after a government-commissioned 2011 report by Lord Davies, a former minister, which set a non-binding target of 25 per cent female representation on boards by 2015 for leading UK companies.

In the US, the private sector is bearing even more of the responsibility for increasing gender diversity.

Valerie Jarrett, a special adviser to President Barack Obama, affirmed at the 30% Club’s New York event that legislation was unlikely and that any government participation would be a part of broader economic goals, such as reducing long-term unemployment and increasing the minimum wage.

A government-sponsored blueprint for change “would be nice”, Ms Morrissey says, but “not entirely necessary”. The 30% Club stands firmly against mandated quotas.

“It’s been a huge effort on the part of many to have come such a long way,” Ms Morrissey says.

“And [it has] taught me you can make change happen by setting out the goal first, believing that it needs to happen and then making it a reality through hard work and openness.”

Further reading: Why 30 per cent?

The 30% Club’s eponymous target for female representation at the highest levels of business reflects the theory that critical mass is achieved once a minority constitutes 30 per cent of a group, writes Jennifer Bissell.

At that point, cultural researchers say the dynamics of a group are altered and the perception of minority group contributions are judged on merit alone.

The idea was first documented in 1977 by Harvard Business School professor Rosabeth Moss Kanter. She argued that when minorities made up less than 15 per cent of a group’s population, they were seen as token rather than full participants.

Minority representatives often faced challenges influencing peers and did not have a significant impact on decisions until their cohort had reached 30 per cent of the broader group, Ms Kantor wrote.

The theory has since been applied to gender in politics and business alike.

With greater representation, experts say, the opportunity for women to gain majority support increases. Then, a woman’s opinion, whether or not her female colleagues agree, is no longer viewed through the lens of her gender.

If it achieves its original goal, the UK arm of the 30% Club says it will continue to work to improve gender balance at all levels in the workplace.