Boards failing to commit to diversity as ‘who you know’ culture prevails Appointment process to private sector boards lacks transparency

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Boards failing to commit to diversity as ‘who you know’ culture prevails Appointment process to private sector boards lacks transparency

Boards in Ireland lack diversity in terms of gender, skills, race and ethnicity, while women are losing out to men in the ‘who you know’ culture which dominates the appointment process to private sector boards in Ireland, according to the Diversity in the Boardroom* report released today by the Institute of Directors in Ireland (IoD).

Key findings

  • 67% of directors knew up to three or more people on the board before joining
  • Men are almost three times more likely than women to be appointed to boards through a direct approach
  • 63% of women say unconscious bias is the main barrier to accessing the boardroom
  • Over a quarter of boards have less than 10% female membership
  • 69% of directors say their board lacks cyber-risk expertise
  • Majority of directors agree that diversity improves board effectiveness and company performance but diversity policies and rotation systems not in place

The profile of Irish boards: Who they are and how they get there

The Diversity in the Boardroom survey of 302 IoD members, the largest proportion of which are from private sector companies, found that 42% of directors surveyed were appointed to their position through direct approach while just 1 in 5 (19%) directors were appointed through an independent process. Two-thirds (67%) of those surveyed knew up to three or more people on the board before they joined.

Men are more likely than women to be appointed to boards through networks of contacts with 1 in 2 (50%) men recruited through direct approach by a member of the board; compared to just 19% of women.

Commenting, Maura Quinn, Chief Executive, Institute of Directors in Ireland, said:

“Considering that we now have an open and transparent process of appointment to State boards which takes diversity into account, private sector boards in Ireland would appear to be lagging behind.

“Board members tend to appoint directors in their own likeness and so the ‘who you know’, informal approach, through personal contacts and networks, means that there is little opportunity to achieve meaningful diversity in the boardroom.”

Gender

89% of directors surveyed say gender diversity is important when recruiting new board members but the level of female representation on boards in Ireland remains low. 65% of directors report less than 30% female representation on their board and over a quarter (28%) report less than 10% female membership.

72% of women believe it is more difficult for them to be appointed to boards than it is for men. 63% of women consider unconscious bias as the main barrier to accessing the boardroom followed by interlocking directorships (52%) and a lack of access to networks (44%).

Conversely, the largest proportion of men (44%) claim that the pool of suitably qualified women is not large enough and 1 in 5 (20%) men are of the view that there are no barriers to women being appointed to boards.

Composition

In addition to low levels of gender diversity, the research found a clear absence of racial and ethnic diversity in boardrooms in Ireland with limited appetite for change. Board members are Caucasian (98%) and of Irish ethnic background (91%) while other races and ethnicities are minimally represented; 7% or less. 2 in 5 (44%) directors surveyed rate the importance of ethnic and racial diversity when recruiting board members as slightly or not at all important.

There is a good mix of age on Irish boards with the largest proportion (43%) of directors between 45 and 54 years of age. However, geographical diversity is particularly limited in Dublin as 70% of directors of boards based in the capital are from Dublin / Leinster.

Broader range of skills needed

There is similarity of skills and educational background across the directors surveyed. 40% of men and 31% of women surveyed hold a professional qualification (eg legal / accountancy). More women (35%) are educated to master’s degree level than men (19%), calling into question the view amongst men that the pool of qualified women for board positions is not large enough.

The range of skills and experience on boards has changed in the past five years according to 79% of directors surveyed, even so, 43% report skills’ deficits on their board. One-third (35%) of directors admit to deficiencies in their own skills and experience with marketing, communications and human resources skills among the shortcomings identified.

Of particular concern given the current prevalence of cyber threats is an apparent lack of expertise in the areas of cyber-risk, cybersecurity and IT on Irish boards. 69% of directors report that their board does not have cyber-risk expertise, 51% say there is a lack of IT strategy expertise and 60% of directors surveyed believe their board does not have sufficient cybersecurity expertise to mitigate significant risks to the organisation.

Committing to diversity

81% of directors surveyed agree that board diversity leads to enhanced board effectiveness and company performance and a further 78% of directors surveyed agree to some extent that their board is committed to supporting a culture of inclusion.

While directors support the benefits of board diversity in a general sense, the level of formal action being taken is limited.

70% of those surveyed either don’t know or say there is no diversity policy / statement in place on their board while 45% say their board does not have a rotation system in place for board tenure.

In addition, directors do not seem to know who is responsible for ensuring diversity on their board with mixed views emerging; full board is responsible for board diversity (30%), chairperson is responsible (26%), nominations committee is responsible (17%).

Maura Quinn, concluded: “The homogenous nature of some boards in Ireland limits the potential for diversity of thought and heightens the possibility of group-think. Without formal diversity policies in place or a transparent and open appointment process, it will be difficult to move beyond the status quo.

Article Published: 27/07/2017