Queen's Speech

Lord Smith of Clifton Excerpts

Wednesday 2nd June 2010 Lords Chamber

[Lord Smith of Clifton]

My Lords, I thank my noble friend Lady Wilcox for introducing today's debate on the gracious Speech. She is the Minister dealing with business in this House, and I congratulate her on that and wish her well. Indeed, she and her portfolio are both highly relevant to the topic I will discuss today; namely, the role of women and their representation on the boards of major companies.

The previous Government ignored the issue, despite the strong efforts of Harriet Harman, who deserves much credit. When he was a Minister at the Treasury, the noble Lord, Lord Myners—I am sorry that he is not in his place—dismissed the idea of legislation in this area when I put it to him. I admired him greatly for most of his time as a Minister and said so; but where he fell down badly was in refusing point blank to look seriously at the paucity of women directors. In mitigation, he boasted that, when chairman of Marks and Spencer, he had the highest proportion of women board members of any large company. However, most of them were non-executive directors; and that record does not absolve him from the wrong judgment that he made in office.

The noble Lord is reported as intending to undergo theological training: not the usual form of hedge-betting that former financiers practise, but one that might start a trend. Who knows? The partners of Goldman Sachs may end up doing God's work after all. Theological training will give the noble Lord an opportunity for reflection, after which I hope he will be converted to the full and equal participation of women in the corporate governance of our major companies, and to the proposition that legislative provision should be made to ensure this.

It is a sign of progress, I hope, that in the course of the past few months, there has been some evidence of a growing awareness of the necessity of securing more women as directors. In March, the noble Lord, Lord Davies, then Minister for Trade and Investment, wrote to the chairmen of the FTSE 100 companies urging them to appoint more women directors. On 8 March, in answering a Question posed by the noble Baroness, Lady Howe of Idlicote, he agreed that,

“it is not acceptable that 25 per cent of the FTSE 100 companies do not have women on their boards”.—[Official Report, 8/3/10; col. 6.]

He added that the Financial Reporting Council would be instructed to ask companies the reasons for this lack, and to name and shame them.

It is quite disgraceful that women make up only 5.2 per cent of executive directors of the FTSE 100 companies. Though it was not mentioned specifically in the Queen's Speech, this initiative is being maintained by the new coalition Government. The Financial Reporting Council, under its new chair, the noble Baroness, Lady Hogg, is to review its code to require companies to have regard to diversity in their main board appointments. I wish her well in her new post, because she will have her work cut out.

Before the general election, it was reported in the Financial Times on 3 May that the Conservative equalities manifesto proposed that half the long-lists for directorships would have to be women; that directorships would have to be publicly advertised; and that any company with less than a third of women members would have to state in its annual report what steps it was taking to remedy the situation. These are much bolder commitments than those of the previous Government, and are to be welcomed as far as they go—which is still not far enough if the UK is to catch up with international best practice. Norway has been the outstanding pioneer in tackling this problem. It legislated to require companies to have women as 40 per cent of their directors by this year. In fact, the target was met in 2008. Spain has followed suit. France is going further in insisting that 50 per cent of company boards are composed of females by 2015. This is the kind of progress that is required; the imposition of quotas to be met by specific dates is the only way to remove the glass ceiling. Predictably enough, the Institute of Directors is already bleating about the proposed very modest changes to the FRC code. Ruth Sealy, deputy director of the International Centre for Women Leaders, has said:

“Nobody likes the idea of quotas, as it isn’t meritocratic. Yet meritocracy only works with a level playing field. It isn’t level in the UK”.

Male chauvinism is especially at work in the financial services sector. A recent survey of Oxford undergraduates revealed that women respondents regarded the City, and particularly the banks, as “unethical” and as having,

“poor promotion prospects for women”.

A month later, the Treasury Select Committee validated these opinions as reflecting current reality. The committee also cited evidence that the gender pay gap in the City was some 41 per cent compared with 21 per cent in the economy as a whole.

The question has been asked whether more women in senior positions would have prevented the current crisis. That cannot be easily answered, although there is some evidence that companies with the largest numbers of women directors in the United States are among the most prosperous. But women could hardly have done worse than the men who caused the crisis. However, that is not the point, which is that women should have the same opportunities to participate in senior corporate positions—it is hoped in ensuring success, but also in sharing the blame when failures occur.

I urge my right honourable friend Theresa May, the Home Secretary, who is also the Minister for Women, together with my honourable friend Lynne Featherstone, the Equalities Minister, to press hard for boardroom equality. They should ensure that the coalition Government, with their gross preponderance of men, follow the FRC code. The Queen’s Speech in 2011 should spell out how the Government intend to rectify the position and by when. I trust that the Minister, in winding up, will be able to reassure me on this point.