Top firms should employ more women to avoid corporate failures MPs say

Top firms should employ more women to avoid corporate failures MPs say

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The Commons Business, Energy and Industrial Strategy Committee has called for action from government and FTSE companies to ensure more women are assigned to senior and executive management roles.

MPs argue that more diversity in the context of board membership will enhance informed decision-making, as government looks to address corporate governance concerns for British businesses. 

Listed companies and firms within the FTSE should be required to employ women to at least half of senior and executive management level positions from May 2020, ministers have said.

Furthermore, companies that fall short of this target are to provide an explanation in their annual report, as well as the action they are taking to rectify the gender inequality.

Closer inspection of the progress to balance gender representation at the top of these firms since the Davies Review reveals that the increase has largely been women taking up non-executive roles. Meanwhile, one board in the FTSE 100 still has no women directors.

GlaxoSmithKline, which recently appointed Emma Walmsley as CEO, is one of seven companies in the FTSE 100 with a female chief executive.

“Companies need to ensure that women are encouraged from early on in their careers, through mentoring, meaningful work experience, and proper flexible working, to ensure they are equipped to progress to executive director posts,” the report said.

‘Cosy club’

MPs recommend for organisations to implement measures that will enhance the executive pipeline, and ensure that talented people within their organisation are encouraged and supported at an early stage of their careers, to progress through to middle and senior management.

The committee also extended its case for diversity within boards to ethnicity, arguing that individuals from similar backgrounds and expertise are more unlikely to challenge each other, or innovate, or think imaginatively.

Chair of the business committee Iain Wright MP said:  “Too often in the wake of corporate failures we discover that directors, especially non-executives, have failed to provide sufficient challenge.

“Too often these individuals seem to be drawn from the same cosy club. We do not recommend tokenism, but we strongly believe a diverse board both better reflects the society in which the firm operates and provides greater challenge to the strategy and decisions taken, which should improve company performance and profitability.

“We need greater diversity in our boardrooms, better training for directors, and more measures to enhance the executive pipeline, ensuring that talented people within an organisation are encouraged and supported at an early stage of their careers, and beyond, into middle and senior management.”

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