Inquiry calls for more women in boardroom By Zoe Wood and Tom Bawden

 Government review by Lord Davies calls for 25% female board representation by 2015 – but stops short of mandatory quotas.

Only one-in-eight directors of FTSE 100 companies are women. Photograph: Corbis

 A government inquiry into male dominance of UK boardrooms has ruled out setting mandatory quotas to force companies to hire female executives but said FTSE 100 companies should aim for a minimum of 25% female board representation by 2015. 

 Lord Davies of Abersoch, who led the official review for the government, said "radical change" was needed "to ensure that more talented and gifted women can get into the top jobs in companies across the UK".

 FTSE 350 companies should be setting their own, "challenging targets" and he expects that many will achieve "a much higher figure" than the minimum 25%.

 Launching the report on Thursday, Davies called on chairmen to announce their goals in the next six months and for chief executives to review the percentage of women they aim to have on their executive committees in 2013 and 2015.

 Davies said: "Over the past 25 years the number of women in full-time employment has increased by more than a third and there have been many steps towards gender equality in the workplace, with flexible working and the Equal Pay Act, however, there is still a long way to go.

 "Currently 18 FTSE 100 companies have no female directors at all and nearly half of all FTSE 250 companies do not have a woman in the boardroom. Radical change is needed in the mindset of the business community if we are to implement the scale of change that is needed.

 "This is not about aiming for a specific figure and is not just about promoting equal opportunities but it is about improving business performance. There is growing evidence to show that diverse boards are better boards, delivering financial out-performance and stock market growth.

 The report has a number of other recommendations:

• Investors should pay close attention to the recommendations from the report when considering re-appointments to a company board.

• Companies should periodically advertise non-executive board positions to encourage greater diversity in applications.

• Headhunting firms should draw up a voluntary code of practice addressing gender diversity in relation to board level appointments to FTSE 350 companies.

 Last August the coalition asked Davies to look for ways to foster gender equality in Britain's boardrooms. Only one-in-eight directors of FTSE 100 companies are women and based on progress to date it would take 70 years to balance the sexes.

Quotas

 As part of his research the former Standard Chartered boss studied Norway, where the government did impose a 40% quota for female directors of listed companies. He also considered the obstacles women have to overcome to become directors of listed company boards. Only five of Britain's FTSE 100 companies have female chief executives: Alison Cooper at Imperial Tobacco, Cynthia Carroll at mining group Anglo American, Marjorie Scardino at Financial Times owner Pearson, Angela Ahrendts at fashion label Burberry and Katherine Garrett-Cox at fund manager Alliance Trust. Yet six-out-of-10 university graduates are women.

 The effort to improve gender diversity in UK companies is in keeping with Europe-wide action on the issue. France and Spain have followed Norway in introducing quotas. In Germany, the chancellor, Angela Merkel, this month said the country's male dominated boardrooms were a "scandal" and that companies had "one last chance" to address the issue before facing enforced quotas.

 Benja Stig Fagerland, who advised the Norwegian government on the issue, said the decision to recommend targets rather than quotas was a cop out. "I don't think defined targets in the UK will be effective. Unless you want to wait 100 years for boardroom equality the UK needs to introduce quotas."

 The percentage of Norwegian board seats occupied by women soared from 6.8% in 2003 – when the government agreed to introduce a 40% quota – to 44.2% in 2008, although it has since declined slightly to 37.9%, according to research published by the European Professional Women's Network (EPWN) on companies with a market value of more than £1bn. Davies said, however, that only 11% of the 2,600 submissions received by the panel were in support of the Norwegian system.

 Fagerland, who has advised British employers' organisation the CBI and Norway's equivalent, the NHO, on how to increase the number of women in British boardrooms, said Norway introduced the quotas after several years of voluntary compliance failed to have much impact. "When you don't have the knife of quotas at your throat, it's easy to say you're committed without actually doing anything about it," she said.

 Davies, the trade minister in the last government, said the inquiry panel would remain intact and would meet every six months. He has not ruled out pushing for quotas if companies do not fall into line.

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