Over the past decade, female representation on bank boards has increased in a number of developed countries following the introduction of corporate quotas, as well as affirmative action pushes and league tables.
Nordic countries have led the way. Norway introduced legislation in 2008 that required companies to have 40% female board representation and companies that failed to comply faced fines or closures, while Finland introduced similar quotas.
The European Commission encouraged countries to enact legislative action in 2010, setting a 40% target in 2012. In 2011, France passed a bill requiring 40% female directorship by 2016. Italy introduced a similar law requiring public companies to appoint at least 33% women in 2015. “The implementation of mandatory quotas has had a significant impact,” says Professor Barbara Casu, director of Cass Business School's Centre for Banking Research.
“Without a regulatory intervention, it would have taken Italy 100 years to get to where it is now [in terms of gender representation] because of the structural and cultural issues in the country.”
Between 2011 and 2021, female representation on bank boards in Italy jumped from 4.2% to 40.4%, while in France it increased from 28.4% to 45.3%, according to research company BoardEx.
Forms of encouragement
In January this year, Germany brought in legislation to force larger listed companies to have at least one woman on their management boards. The law builds on a 30% quota for supervisory boards introduced in 2015. Between 2011 and 2021, the number of women on bank boards in Germany increased from 19.4% to 31%.
Germany has a dual board structure – with an executive board and a supervisory board – so the entire board is bigger than other countries, Ms Casu points out. “It may have a similar number of women on its bank board than other countries, despite [lower] percentages.”
Despite its progressive reputation on corporate governance, the Netherlands has relied on affirmative action policy to encourage greater representation in management and meet a non-binding gender balance target of 30%. However, the country has recently introduced a hard gender quota on board-level appointments.
The impact of the country’s non-binding approach can be seen in the comparatively modest increase in female representation on bank boards in the Netherlands over the past decade, rising from 13% in 2011 to 27.8% in 2021.
The UK, meanwhile, has relied on “peer-based pressure” to encourage greater diversity by publishing league tables highlighting the most and least diverse companies in a bid to increased representation, Ms Casu says.
A UK government-backed review that sought to encourage firms to fill a third of executive positions with women by 2020, was recently concluded by Sir Philip Hampton, chairman of GlaxoSmithKline, and Dame Helen Alexander, chair of UBM. The 33% target it set out was voluntary.
The more women that take up executive roles the more it becomes normalised, making it more likely that more women will be put forward
“Now that the Alexander-Hampton review is finished its going to be interesting to see if relying on peer pressure and the publication of league tables is sustainable because it is not enshrined in law,” Ms Casu says.
On bank boards in the UK, the number of women has increased from 16.7% in 2011 to 35.1% in 2021.
Among developed countries, the US lags behind its peers, posting 23% female representation on bank boards in 2021, rising from 13.3% in 2011.
“The US remains a traditional conservative country for a lot of people, especially in family-related policy,” Ms Casu says. “Maternity leave and public support are almost non-existent. This has led to a leaky pipeline of women falling off the career ladder.”
On a state level, however, the country is changing. California has enacted legislation to increase gender diversity on boards.
The benefits of diversity
“Over the short term, quotas can have a negative impact on performance, because there are a lot of adjustment costs and due to the limited pool of qualified candidates, but once it’s normalised, the benefit of a diversity of views comes into play,” Ms Casu says.
Companies with greater gender diversity are 15% more likely to generate financial returns above their national average, according to a study by McKinsey.
“There is a lot more attention given these days to a bank’s non-financial performance. People want to know who is running a bank. Prior to the global financial crisis, most people didn't have a clue who ran the banks. People could name one or two high-profile CEOs, but not who sat on bank boards. Now there is a lot more transparency and a lot of people vote with their feet,” Ms Casu says.
Ms Casu cited high-profile female appointments, such as Jane Fraser at Citi and Alison Rose at NatWest, as part of an ongoing process of positive reinforcement that will also help spur change. “The more women that take up executive roles the more it becomes normalised, making it more likely that more women will be put forward,” she says.
“There is still a long way to go. There are still barriers that will take a generation to change. But overall I’m quite optimistic.”
Continue reading: Just look at the numbers: more women means better banks
