Companies see link between board diversity and bottom line

Women make up 42% of new board appointments since last September as large firms see value of gender balance

Fri, 09 Jul, 2021 - 08:30

Joe Dermody

Companies are increasingly seeing the benefits of strategic selection of non-executive directors based on specific areas of expertise, leadership and management experiences, says Anne-Marie Taylor of Board Excellence, the Irish-based global board consulting practice.

Founded in 2016 and led by serial entrepreneur Kieran Moynihan, Board Excellence has delivered projects in more than 20 countries. It advises PLCs, private companies, SMEs and family firms in key areas such as external board evaluations, bespoke director training, independent board dispute mediation and strategic planning.

In searching to replace an outgoing board member, a more professional search approach has replaced the jaded limiting model of a ‘tap on the shoulder’ of someone familiar. Boards now take time to find the right person, someone with integrity and a deep ‘commitment to do the right thing’ for the organisation.

Within this broadening of the talent pool search, diversity and inclusion at board level can play a vital role in ensuring a company connects with a wider public. In brief, diverse, inclusive boards are proven to lead more successful companies. Bigger firms tend to be more alert to this benefit.

“Diversity — age, gender, nationality, experience — is proven to contribute significantly to improved decision-making and company performance,” said Ms Taylor, who is leading Board Excellence's newly launched Non-Executive Director Search Service. “For most companies, the benefits of having diversity on your board are a given at this stage.

“There are, however, a lot of boards that are essentially a group of people who all see things from a similar perspective. Gender balance is certainly improving on boards in Ireland.”

Anne-Marie Taylor, partner, Board Excellence.

However, a recent report by the National Women's Council (NWC) showed that women on the boards of Irish listed companies had fallen to 22.4% for the year to September 2020. Some 19% of Irish listed companies had no female directors as of last September.

Whereas for 2019, Ireland was a leader in the EU for board-level gender balance, that balance dipped in 2020. Only 27% of all new board appointments in 2020 were female, down from 50% for March-Sept 2019.

None of the 13 new executive directors appointed for March 2019 to September 2020 were women. Again, this relates to Irish-based companies with a stock exchange listing.

Has Covid-related anxiety caused Irish businesses to forget about diversity and gender balance at board level?

The NWC cited other jurisdictions in which mandatory quotas have boosted gender balance on boards.

“We have seen a lot of progress even since last September,” said Anne-Marie Taylor. “The NWC and ourselves share the same objectives in terms of seeking greater gender balance. They're suggesting that mandatory quotas may be needed. We believe that setting targets does work.”

She cites new Balance for Better Business data showing that women now account for 26% of board members of Irish listed companies, up from 22.4% last September. The ratio of boards without women has also fallen.

“It was 19% in September 2020, it is now down to 13%, comprised of five boards, mostly very small. Between them, they account for fewer than 700 employees,” she said. “Of course, there shouldn't be any all-male boards, but at least the larger companies have seen the benefits of gender balance.”

The Balance for Better Business figures also show that 42% of new board appointments from September 2020 to now have been female (27% in 2020; 50%, March to Sept 2019).

Two executive directors have been appointed in these listed companies since September 2020, both female. Some 30% of directors on the top 20 listed companies (ISEQ20) are female (up from 27% in September 2020).

Ann-Marie Taylor says the numbers are small, but definitely going in the right direction.

“Over the years, a lot of women have come to me saying they want to get on a board, but they don't know how,” she added. “The process is usually very transparent with multinationals and state bodies, but less so with family-run businesses and SMEs.

“It's not easy for smaller companies; there's really nowhere to go to find out what to do. They tend to seek help from their accountant, an advisor or some buddy in another business. They just end up limiting the make-up of their board. We are trying to professionalise the match.

“Too often companies don’t know how to go about finding a director and they end up relying on suggestions from colleagues and advisors. This ‘tap on the shoulder’ approach means that companies are often limiting their options. If companies just appoint directors from within their own network, they can miss out on rich sources of talent which can bring innovation and fresh thinking to the business.”

Board Excellence has an extensive network of potential directors with a wide range of backgrounds and experience. Anne-Marie Taylor recently joined as one of seven partners.

She has served on the boards of the Public Appointments Service, Irish Hospice Foundation and UCD Governing Authority. She is the co-founder of the Board Diversity Initiative, which produces a directory of senior women suitable for board roles.

She was also programme director of Balance for Better Business. Since it was formed in 2018, women have risen from 18% to 30% on the boards of the top 20 listed companies in Ireland.

Most of Anne-Marie’s executive career was with Accenture, in roles including consulting senior executive, director of operations and director of human resources.

Niall Horgan, CEO and co-founder of Gym+Coffee and a client of Board Excellence, said: “Board Excellence helped us recruit top talent to our newly formed board of directors. Their network is incredible and they connected us with some fantastic individuals who all would have been suitable for our board.”