Corporate Boards (Diversity)

Debate between Keith Vaz and Chuka Umunna

Wednesday 28th October 2015 Commons Chamber

[Mr Umunna]

Our debates have been described as “slightly yah-boo”, but the issue of diversity has illustrated that when there is broad agreement across the parties, we can actually achieve great progress and effect change in our society. In the last Parliament we had a Liberal Democrat Business Secretary in a Conservative-led Government, commissioning a Labour peer to carry out a review and then produce a report into how we can improve the way in which our boardrooms in this country operate—what they look like—ensuring that they are more representative. What happened as a result of that approach? In 2010, women made up just 12.5% of FTSE 100 boards. In the FTSE 100 at that point there were 21 all-male boards. Later in 2010, Lord Davies was commissioned to do his work by Sir Vince Cable, the then Business Secretary. In 2011, Lord Davies reported, making a range of different recommendations, and perhaps the one that stood out publicly was the target to ensure that women make up 25% of FTSE 100 boards.

The initial reaction of some businesses and business groups was not necessarily terribly encouraging. We all hear the merit argument: “Why pay attention to somebody’s background? Appoint on merit.” The problem with that argument, as ever, is that if boards have been appointing on merit, the reason that our boards do not look like modern Britain and do not have enough women on them is that there are not sufficient women who merit promotion to the board. That argument does not hold water. It did not hold water in 2010; it certainly does not hold water in 2015.

[Keith Vaz (Leicester East) (Lab)]

I am most grateful to my hon. Friend for giving way and I congratulate him on all the marvellous work that he did in opposition on this subject. His comments on gender equality also apply to ethnic minority representation. Today I attended the funeral of a great British entrepreneur—Gulam Noon, who created a business from absolutely nothing. There are people of talent around now—people such as the late Lord Noon—who could easily serve as executive directors on the board of British Airways or others of that kind. It is not that we wait for legislation; this can be done now, if corporate Britain decides to act.

[Mr Umunna]

I could not agree more with my right hon. Friend. Lord Noon was a trailblazer, and his passing is a great loss for our country. On behalf of Members in all parts of the House I extend our sympathy and condolences to his family. He was a big man and he made a huge difference.

Effecting change so that we have more Lord Noons and more diversity in the boardroom has required leadership from business groups such as the CBI, the Institute of Directors and the women’s 30% Club. The last Business Secretary also undoubtedly forced change. One of the most important aspects of this debate is the Government ensuring that they keep on the table for business the prospect of more prescriptive action if a business-led approach does not achieve sufficient change. The result of what was done on gender is that in 2015 there are no all-male boards in the FTSE 100, and 26.1% of board members overall are women—a fantastic achievement.

Gender Balance on Corporate Boards

Debate between Keith Vaz and Chuka Umunna

Monday 7th January 2013 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

Before I discuss the substance of the motion, it is important to make three brief observations for the record.

First, today we debate the need for greater gender balance among those in positions of leadership in business, but in so doing this House and the Government should acknowledge their own failings in this area. Just 22% of the current Members of this House and just four—18%— of the Cabinet are women. That is a disgraceful state of affairs in 2013. Labour Members are proud that 33% of the parliamentary Labour party and almost 40% of the shadow Cabinet are women, but we all need to do better. By all means we should debate the matter, but we in this House are certainly in no position to lecture.

Secondly, the subject of the motion is gender balance, but, as my right hon. Friend the Member for Leicester East (Keith Vaz) said, it is important to note that there is woeful under-representation on company boards in other respects that must be addressed too. For example, according to the latest research from Cranfield university, just 5.7% of FTSE 100 directors are drawn from an ethnic minority while the new census figures indicate that 14% of the population is now from a non-white background. How can we inspire young black and Asian Britons to reach for the top when they see so few people who look like them in our boardrooms, never mind here in Parliament?

Thirdly, diversity in executive directorships also matters, as does the diversity of the boards of directors of non-listed private companies. I think that Sir Richard Branson has made that point, too.

We cannot stand idly by on other issues of representation in the leadership positions that people hold in modern Britain. Today, however, we are bound to focus on the issue of gender balance among non-executive directors of listed companies, because that is the subject of the draft directive and the motion.

Two central questions flow from the motion. The first is whether we should take action, and if so what sort, in relation to the gender balance on the boards of listed companies. The second is whether that action should be taken at the level of the European Union. As the noble Labour Lord and former Business Minister in the Labour Government, Lord Davies, made clear in his excellent February 2011 report “Women on boards”, despite some progress under the previous Government, the representation of women on boards in this country is woefully low, as the Minister has set out today.

In 2003 we set up the Higgs review of corporate governance, which called for greater diversity on our corporate boards. In percentage terms, female-held directorships in the FTSE 100 doubled under the previous Labour Government, but I am clear that we must concede, with regret, that despite that, progress was lacking, with—I think the Minister cited the figure—women holding just 12.5% of FTSE 100 directorships when we left office in 2010. As Lord Davies pointed out, if that rate of change continued, it would have taken about 70 years to achieve some level of parity.

As Lord Davies made clear, there is as much a moral imperative to change this state of affairs as there is a strong business case to do so. The Minister has echoed those sentiments. I do not believe that this is a matter of party political discord.

[Keith Vaz]

I welcome my hon. Friend’s mea culpa in respect of the previous Labour Government. Does he know why we failed to make more of an impact? Was it because of a lack of a message from the then Government to the constituent parts that could have acted upon it, or was it the case, as the Minister has said, that the culture in the business community took so long to change? Is my hon. Friend able to offer an explanation of why we did not do better?

[Mr Umunna]

I think that some of the things that my right hon. Friend has just mentioned may have contributed to the state of affairs when we left office. As the Davies report makes clear, this is an historically complex issue. The easy conclusion to draw would be that our business community has a high level of overt and outrageous discrimination. I know through my own practice as an employment lawyer that, unfortunately, that still exists in some small pockets of the business community. However, I think that there are cultural factors at play and that the issues that women in the workplace face with regard to child care and flexible working all contribute to the lack of progression in the pipeline of appointments in different companies. To tackle that, individuals need to take a lead and have the will to bring about cultural change in individual organisations.

To be frank, one thing for which I do not apologise is our reluctance to move straight towards prescriptive legislative solutions to these problems. I believe that we should regulate or legislate as the last resort, but what has become clear is that, as Lord Davies concluded, there needs to be far more will in the business community, never mind the political community. Another important point that Lord Davies made is that we should be clear about not ruling out taking further action in this House if we do not see enough progress culturally in the business community.

As the report made clear, many of the more than 2,500 responses to the Davies review said that women with the relevant experience were frequently overlooked for development opportunities and that there were differences in how men and women were mentored and sponsored, giving men an edge over their female peers in gaining appointment to boards. We cannot tolerate that in a society that seeks equal opportunities for all, regardless of background. To do an effective job, boards must be made up of competent, high-calibre individuals who offer a mix of skills, experience and backgrounds. I fail to see how our boards can optimise their performance unless they are representative of the population as a whole. After all, in many cases, their customers are the population as a whole. There is a wealth of evidence to back that up, and it is all in the Davies report.

If we accept that the status quo is wrong and believe that it compromises the performance of our companies and our economy, as Opposition Members do, action has to be taken. That is why we endorsed all the recommendations of the Davies report. Those who argue against action often accuse those who argue for it of engaging in tokenism and of promoting diversity over merit. Of course board appointments must always be based on merit, with the best qualified person getting the job, but to suggest that no action should be taken is to presume either that there are not enough women who merit appointment or that there are not enough women who want to be appointed. That flies in the face of the evidence in 2013. There are plenty of women who merit appointment. Diversity and appointment on merit are not mutually exclusive. The problem is that there are barriers and obstacles that must be broken down to ensure that the appointment of women is as usual as the appointment of men.

The Davies report advanced a set of 10 voluntary measures, as the Minister has said, with a view to there being a minimum of 25% female representation on boards by 2015. The Minister went through the most recent update so I will not go through all the details, but there has been not insubstantial progress towards achieving the 25% goal. However, more action is clearly needed if we are to achieve the goals set out in the Davies report. Even if the goal is met, I believe that 25% is a modest aspiration. We should all want companies to make more progress than that. The Government should keep the matter under review and should reserve the right to introduce more prescriptive measures to force faster and greater change if necessary.

Banking (Responsibility and Reform)

Debate between Keith Vaz and Chuka Umunna

Tuesday 7th February 2012 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

I beg to move,

That this House notes with concern that the recent Bank of England publication, Trends in Lending, shows that net lending to businesses has fallen in nine out of the last 12 months and by more than £10 billion in the last year; further notes that a Department for Business, Innovation and Skills report published on 2 February 2012 states that the stock of lending to small and medium-sized enterprises peaked in 2009 and in November 2011 declined by 6.1 per cent. compared to November 2010, whilst banks were frequently setting bonuses for their senior executives which were too large; believes that bank executive remuneration should be related to performance and that banks either directly or indirectly supported by the taxpayer must recognise that the taxpayer expects very large bonuses only to be paid to reflect genuine exceptional performance; notes with concern that the Government has not given due consideration to repeating the bankers’ bonus tax, in addition to the bank levy, to pay for 100,000 jobs for young people; calls on the Government to increase transparency, accountability and responsibility in the setting of pay in the banking sector, including through the immediate implementation of the Walker Review on corporate governance, and the placing of an employee representative on the remuneration committees of company boards; and further calls on the Government to reform the banking sector so that it better supports businesses and provides the credit they need to create jobs and growth.

I should like to take this opportunity to tell the House that I have been informed that the Business Secretary is not able to be here today because he is at a funeral. I am sure that the whole House will want to join me in wishing him well on this sad day.

The subject of the motion, responsibility and reform in the banking sector and in the wider economy, has been a matter of immense public interest of late and is one on which many Members have already spoken out. Let us be clear—I think I speak for most Members when I say this—that in speaking out on these issues hon. Members simply reflect the strong views expressed by our constituents on the subject.

The Labour party’s starting point is this: we are proud of our financial services centre, the City of London being arguably the world’s leading financial services centre. I, my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chief Secretary to the Treasury, who will make the Opposition’s winding-up speech, and many other Members are, I know, proud to have spent time working in the City of London before being elected to this place.

The City helps to give the country a competitive edge, thanks to the talent that we have here, our time zone, our company law, our jurisdiction and the free flow of capital in London. The financial services sector as a whole employs more than 1 million people nationally and makes up 10% of our total national income, but no witness to recent history could claim with credibility that the sector has functioned as British businesses, our economy and our society as a whole would have wanted over the past few years.

Ultimately, the fault for that lies with a minority of those working in the sector, but as the party in government through much of that period we, along with others in power throughout the world, must, and we do, accept with humility that we should have better regulated the sector, because dysfunction in the banking sector here and globally led to the financial crisis of 2008-09, to the recession that followed and to its aftermath. That recession, the gestation of which is found in the banking sector, is something for which the British people are still paying.

[Keith Vaz (Leicester East) (Lab)]

My hon. Friend will be aware that the current structures were set up following the closure of the Bank of Credit and Commerce International 20 years ago. There remain within the Treasury the confidential parts of the Bingham report. Does he think that it is time that those confidential parts were published? That would give us a better understanding of exactly what went wrong in the biggest collapse of a bank in British history.

[Mr Umunna]

I agree with my right hon. Friend. I know that that is something for which he has campaigned for a long time.

We all know the facts. From the middle of 2007, the losses sustained on securities backed by sub-prime mortgage assets led to a credit crunch. That credit crunch came about due to a loss of counterparty confidence and uncertainty about which financial institutions held toxic assets. Depressed asset prices and increased losses led to serious solvency issues in major banks here and in the United States.

In the US, Bear Stearns had to be rescued by J. P. Morgan, Lehman Brothers collapsed, and AIG was nationalised in 2008 by that well known socialist, the 43rd President of the United States, George Bush. Here, Northern Rock had already been nationalised by the Labour Government by 2008. Later that year, we put in place a £500 billion package of measures designed to recapitalise the banks. That included the special liquidity scheme and inter-bank lending guarantees. The Labour Government took stakes in two of our biggest banks so that, by the end of 2009, the Government held a stake in Lloyds of just over 40% and a stake in RBS that increased to more than 80%.

For all the criticism that is often heaped on my right hon. Friends the Members for Edinburgh South West (Mr Darling) and for Kircaldidy—sorry, for Kirkcaldy and Cowdenbeath (Mr Brown)—by Government Members, I believe that we owe a debt of gratitude to them both for the decisive action that they took to save the system from itself, to secure people’s savings and to ensure that the people we represent could continue to withdraw money from cash machines in the wall. The Opposition are proud of what they achieved.

As the Independent Commission on Banking stated:

“without the intervention of national authorities around the world—requiring taxpayers to incur significant direct costs and larger contingent liabilities—the consequences of the crisis would have been immeasurably worse.”

It is for that reason that this House has every right to take an interest in remuneration and reform in the banking sector. After all, our banks still benefit from an implicit taxpayer subsidy if they fail.