This month, Legal and General Investment Management took the bold step of launching the L&G Future World Gender in Leadership UK Index Fund, AKA ‘The GIRL’ fund, which will favour companies with the best record in gender diversity. The fund will rank companies based on four different measures, including the number of women on the board.
Most of us that actively follow the debate on gender diversity will be unsurprised to note that only one of the UK’s top 350 companies scored full marks according to L&G, but other well recognised brands including Marks and Spencer, Merlin Entertainment, and Next scored 85 or above. Clearly these firms have made a commitment to tackling the gender gap that is paying off, but so many others are lagging behind. This is despite countless pieces of research proving that gender diversity improves productivity and stimulates creativity. The case for gender equality in the workplace seems obvious, so why does progress towards achieving it feel slower than it should?
That’s not an easy question to answer, as there are so many factors at play. The significant cost of childcare in the UK, lack of flexible working opportunities, misinterpretation of what meaningful diversity actually means and unfortunately, sometimes inherent cultural barriers to women either entering the workforce in the first place, or progressing and achieving their potential. All of these things play a part, but they won’t all be solved overnight.
In the meantime, pro feminist organisations like the Fawcett Society are establishing a stronger foothold in the media, and the 30% club (whose aim it is to secure at least 30% female representation on FTSE 100 boards) are proud to report that in the 8 years since they were founded, the current percentage figure stands at 28.9%. The latest workforce stats also show that women’s representation in the labour market is steadily increasing; today over 70% of women aged 16-64 are employed (compared to 78.9% of men in the same age bracket). All sounds positive doesn’t it? Yet in April, 10,000 companies reported a gap that was above the national median of 18.4% and the overall stats showed than nine out of ten women work for companies that pay them less than their male counterparts, for doing the same job.
So, while there are many positive steps towards gender equality, women are still getting paid less than men. The relationship between gender representation and equality of pay is a natural one, yet some organisations with the biggest gaps defended them by claiming they simply have more men in the higher paid jobs than women – stating the obvious and highlighting perhaps their failure at addressing women’s access to senior positions. Is it as simple as saying that as companies gradually address their gender imbalance the pay gap will close? Possibly, but with only companies with over 250 people being held truly accountable for equal pay and gender equality, the UK SME community, which represents 99.3% of all private sector businesses in the UK, are not required to demonstrate their track record which seems unfair. Another question is whether the legislation attached to equal pay mean that larger companies ignore meaningful diversity and go down the ‘let’s just quickly promote some women so we look good’ route, again, not exactly a solution.
Whilst businesses seem to recognise the reputational impact of being seen to be inadequately tackling gender bias, some don’t seem to understand the widespread ramifications of their reputation taking a hit. They may well commit to be different but then those plans might take a back seat once the negative coverage dies down. In the meantime, thousands of talented people (both women and men) would have a negative view of their employer brand. Share prices could also be hit for larger businesses, supplier relationships damaged, and there is undoubtedly a marked impact on productivity and employee engagement. That should spur businesses into action, and in truth for the majority it does, but for those that are still not making the progress they should be, then limiting access to something they need (funding) could have a real impact.
One of the reasons why the GIRL fund has been so well received, (and why I personally think it’s a great idea), is because it’s encouraging companies to truly put their money where their mouth is. It’s not giving firms a pat on the back ‘striving towards’ goals or ‘pledging commitment’ (without attributing any metrics). It is conducting a truly holistic review of their approach to gender equality in every sense, and ranking companies accordingly. If other investment firms follow suit (including those which invest in smaller businesses), there could be a real shift; after all, growing businesses require investment to continue to operate. Imagine if they couldn’t access the funds they needed because their track record on improving women’s access to work and on equal pay was deemed unacceptable?
Clearly this isn’t the only way to tackle the issue, but I think it’s quite the landmark announcement which could mark the start of true behaviour change across the gender equality landscape. According to McKinsey, companies across all sectors with the most women on their boards consistently outperform those with no female representation by 41% in terms of return on equity and 56% in terms of operating results. The UN say that eliminating gender discrimination in relation to occupation and pay could increase women’s wages by about 50% and national output by 5% (staggering when you consider that the average growth for the last two years has sat frustratingly below 2% each year).
With statistics like these to consider, let’s hope the positive behaviour change really does start to take off, as our economy and society will most certainly reap the benefits.