The case for diversity on AIM-listed boards: To quota or not to quota – Part 2 | Fieldfisher
Skip to main content

The case for diversity on AIM-listed boards: To quota or not to quota – Part 2

Lily Searle


United Kingdom

A controversial measure that has been contemplated to increase the proportion of women on listed company boards is the introduction of mandatory thresholds or quotas – for example, by stipulating that all boards should have 'at least one woman' or be made up of 'at least 20% women'.

Setting diversity quotas for AIM company boards raises a number of obvious problems – not least the fear of tokenism and boards feeling that female members are there because they tick a box, rather than because they have earned it.
My own attitude to quotas has changed over the years and this shift in sentiment was echoed by some of the women to whom I spoke during my interviews with female board members of AIM-listed companies.

It seems obvious to me that the methods employed to date have not delivered the intended result. Of the directors I interviewed, some said they felt they had been a token appointee, but most felt they had been appointed on merit. 

Many said they would be uncomfortable with the notion of being 'the' woman on a board, especially if they had been appointed to fulfil a quota or mandate. Others thought that while the notion might be an uncomfortable one, the truth is that not enough women are being appointed to AIM boards.

The old arguments that this is mainly a generational problem, and that more women will come through in the future, simply does not stack up in the number of actual appointees. Natural progress has not been and is not fast enough, so perhaps more drastic measures are warranted.

A number of female directors suggested that softer methods, rather than hard legislation, may be more effective and noted that many stakeholders and advisers, as well as boards, have a role to play – a point I expand on below.

Finally, one of the real problems with a mandate or quota is that it is a blunt instrument when it comes to increasing diversity.

Gender balance might be simple enough to quota for, but for more granular aspects of diversity, such as ethnicity, socio-economic background and disability, this approach simply does not work.

The role of listed companies

Existing boards of listed companies will clearly have the biggest effect on forming and maintaining diverse boards.

It seems clear that greater choice of diverse candidates with board experience would greatly increase recruitment of such candidates to boards of AIM-listed companies.

As we have seen, a self-perpetuating cycle exists at present: candidates need experience to be recruited, but they cannot get experience unless they are recruited.

AIM-listed boards should make greater use of shadow executive boards and shadow senior management committees to help break the cycle.

This can be achieved a number of ways:

(1) A shadow board/the senior management team could consider the same papers as the existing board, discuss and make a recommendation of their decision to the existing board;

(2) Senior managers could attend board meetings in a shadow capacity to watch and listen to how board meetings are conducted;

(3) Boards can make use of initiatives such as 'The Future Boards Scheme' run by the 30% Club, which offers individual participants the fullest possible board experience short of being a director.

The scheme provides an opportunity for talented women who have no or minimal remunerated board experience to accumulate credible experience for future non-executive or executive roles. Boards should also consider their talent pipeline with a view to future board appointments.

There is, then, a real need to ensure that senior management teams are equally diverse. Mentoring and sponsorship of senior management teams or employees who may look to move into senior management can be especially valuable.

A focus on underrepresented persons in key positions – such as women in senior P&L roles – could go far in encouraging a more diverse generation of CFOs and CEOs of listed companies.

The more diverse the senior management team of a company, the more diverse candidates there are available for the step-up into an executive board role.

Finally, all boards have a duty to be mindful of unconscious bias. When making recommendations, board members need to make a concerted effort to come up with a diverse shortlist and ensure recruiters do the same.

They also need to listen to and engage with stakeholders about their views on board composition and be prepared to challenge fellow board members to consider non-traditional candidates.

The role of advisers

Advisers are in the fortunate position of working with many different companies and are thus well-placed to connect and recommend diverse candidates to boards.

As previously discussed, a key stumbling block to diverse candidates being appointed to boards is the fact that candidates do not necessarily have a wide circle of diverse contemporaries. Advisers have good sector knowledge and may be able to introduce boards to candidates who are not already known to them.

At a more granular level, advisers could make a much greater effort to create more inclusive opportunities for client engagement. After all, not everyone – male or female – is interested in watching cricket or spending a day on the golf course.

But useful introductions are made and knowledge shared on such occasions, so advisers should be cognisant of not excluding people who don't fit the standard corporate hospitality mould from opportunities to progress.

Many female directors to whom I spoke had been invited to a litany of events, in which they had no personal interest and had either declined to go, or reluctantly attended.

One director did however speak enthusiastically about advisers who had invited her to events that were tailored to her interests. By organising a range of events that will appeal to more than one type of person, diversity in networking is enhanced.

As well as the type of activity, the time of day at which it is held should be considered to ensure maximum attendance from a range of clients, including those with caring obligations or other reasons for not being able to stay outside normal office hours.

Finally, corporate finance advisers, such as Nominated Advisers, could refuse to float a company (or advise it going forward) if it has an all-male board (although, as I outline below, a lack of gender diversity doesn't necessarily denote a less diverse board than one with men and women from the same background).

In all of these areas, greater efforts should be made when considering board compositions to nudge companies in the right direction.

This article was authored by Lily Searle, corporate associate at Fieldfisher, a European law firm and is the second of a three-part series on diversity on AIM-listed company boards. Read Part 1 here.

Sign up to our email digest

Click to subscribe or manage your email preferences.


Areas of Expertise