Dated: 24 February 2011

Commenting on the publication of ‘Women on boards – Independent Review by Lord Davies of Abersoch’, Miles Templeman, Director-General of the Institute of Directors, said:

“We are pleased that the report stops short of advocating gender quotas for the boardroom. Quotas would have been incompatible with a meritocratic approach. However, it was unhelpful that Lord Davies did not rule out quotas once and for all. With only 11 per cent of the respondents to Lord Davies’ consultation – of which 88 per cent were women – supporting the idea of quotas, I question why he thinks the threat of quotas should remain.

Mr Templeman added:

“A greater diversity of people on boards in general is necessary, and this clearly means we need more female directors. The way to do this is to increase the pool of female senior executives from which directors can be recruited. Improving flexible working opportunities for aspiring female executives will be central, with companies rather than Government taking the lead in creating these opportunities.

“We also believe that Lord Davies is right to argue that a combination of entrepreneurs, existing providers and individuals needs to come together to consolidate and improve the provision of training and development for potential board members. This is an area in which the IoD is ready to make a major contribution through its Chartered Director programme and other professional development activities.”

Key IoD points on the substance of the Davies Review:

• We are pleased the report stops short of advocating gender quotas for the boardroom. It is striking that only 11 per cent of the respondents to Lord Davies’ consultation (of which 88 per cent were women) supported the idea of gender quotas.

• However, we are concerned that Lord Davies continues to threaten gender quotas at a later date if “the recommended business-led approach does not achieve significant change”. This attitude is unhelpful. Gender quotas for boards should have been rejected once and for all as being incompatible with a meritocratic approach to senior level appointments. Furthermore, they would be demeaning and undermining for female directors and aspiring female directors

• The report recommends that listed companies should establish policies and new reporting requirements for female participation on boards and amongst senior executives. These measures are not desirable as they distract companies from establishing a board and management structure that best reflects their specific needs.

• Adding further requirements to the UK Corporate Governance code in respect of gender diversity would not be a positive development. The Code already states that “The search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender”. Further requirements in terms of gender diversity policy will increase the risk that the Code becomes viewed as a list of political requirements for listed companies rather than a guide to improved effectiveness.

• We agree that non-executive director appointments should be more widely advertised. Furthermore, Lord Davies is right to argue that “A combination of entrepreneurs, existing providers and individuals needs to come together to consolidate and improve the provision of training and development for potential board members”. This is an area in which the IoD is ready to make a major contribution through its Chartered Director programme and other professional development activities.

• A greater focus on director development would also assist in the achievement of one of the reports other recommendations; that women from “outside the corporate mainstream, including entrepreneurs, academics, civil servants and senior women with professional service backgrounds” play a greater role on boards. Appropriate development and mentoring activities – tailored to the specific needs of women – could contribute a great deal to the achievement of this objective.