Non-Profit Sector: Take Note of the Davies Report: Women on Boards
The discussion below focuses on a recent highly acclaimed report in the UK called Women on Boards that outlines recommendations for addressing the challenge of increasing the number of women on corporate boards (the “Davies Report”).  The report was the work of a Steering Committee chaired by Lord Davies of Abersoch, CBE. The messages are internationally applicable (and indeed the report includes helpful background on the progress, practices, and regulatory approach in several other countries, including the US, France, and Norway). Equally importantly, the report’s approach is an excellent foundation for considering the issues in the non-profit sector across a range of sizes and sectors of organisations.
I highly recommend the Davies Report to non-profit senior management and boards, especially their Chairs and nominating committees. It is relevant not only in the UK, but also in the US, France, Norway, and internationally. The report proposes a balanced and open-minded but disciplined and accountable approach. The suggestions are potentially beneficial to both corporations and their stakeholders and women board candidates. It never loses sight of the overriding governance responsibility of boards. Excellence in governance, the business case for women on boards, and equal opportunity are the lynchpins, including with respect to the recommendations not to implement quotas.
That said, I would have like to have seen stronger links to the non-profit sector in two ways. First, the experience of many women in the non-profit sector is outstanding for corporate boards, whether they are senior management, board members, or industry advisors and experts. Many women also have dual backgrounds. Second, the report missed an important opportunity to target the non-profit sector in terms of its proposals. The messages targeting UK corporate governance are largely applicable in the non-profit sector internationally and should be applied in parallel with, and not with lag time for, the non-profit sector. The following is a distillation of the most salient points for potential application in the non-profit sector. This is not an attempt to summarise the report but rather to highlight the priorities for non-profit sector consideration.
- No Quotas: balance discipline and accountability of results in board recruiting with organisation-specific approaches. Every organisation, corporate or non-profit, has unique governance challenges, substantive expertise requirements, board history, current compositional and functional challenges, and risk management issues. Boards should be able to approach the recruiting of women in the way best suited to the organisation’s needs. Any other approach would quite simply be bad governance. This is equally true in the non-profit sector. In this light, the report declines to recommend quotas, rightfully focusing on “business needs, skills and ability.” Instead, there are proposed aims for 2013 and 2015, combined with measuring transparency, improving transparency of the diversity and recruiting process, establishing a boardroom diversity policy, and improving nominating procedures (see below).
- Look beyond the women CEOs. A more open-minded approach to board composition is essential. Both corporate and non-profit boards need diverse experience. Both can benefit from governance experts in the non-profit sector. The report cites “entrepreneurs, academics, civil servants and senior women with professional service backgrounds.” I would have argued strongly for considering women with expertise in non-profit sector governance, particularly those with combined for- and non-profit experience.
- The business case. The various business reasons why women directors are beneficial to corporations include a range of issues equally applicable to non-profit organisations: improving performance, accessing a broader talent pool, and responsiveness to market demands (e.g. women’s significant responsibility for household purchasing decisions and, in the case of the non-profit sector, women’s considerable influence on a household’s charitable donations). In addition, the Davies Report cites several research reports demonstrating that women are believed to demand higher standards of corporate governance (due to such reasons as better communication, focus on non-financial measures, and favouring training programs for directors). I oppose this sort of generalising either for or against women, as I believe board performance is highly individualised. Yet the research is relevant – to the debate and to the non-profit sector.
- Transparency. The Davies Report rightly reminds of the need for specific disclosure regarding the objectives of and approach to women on boards. Whilst it might seem obvious that transparency regarding governance practices would include diversity policies, I have seen few examples of the focused reporting the Davies Report suggests – in the corporate or non-profit sector. As noted under above in the discussion of the business case, in addition to the general transparency objective, the Davies Report cites myriad research showing shareholder interest in women on boards. Non-profit donors and beneficiaries of non-profit organisation’s services care too, or should learn to care. Thus again there are direct business and accountability reasons for the transparency recommendations in both the corporate and non-profit sectors.
- Voluntary Actions. The Davies Report highlights an issue that has long been the core of my philosophy of both corporate and non-profit best practice: best practice always exceeds the legal obligations. As noted above, in the case of corporations, the Davies Report rightly notes that there is a business case for this. There is in the non-profit world as well. In addition, the non-profit world always does well to anticipate transference of corporate regulatory requirements to the non-profit sector. Broad implementation of voluntary practices can contribute to off-setting excessive, ineffective regulation.
- More diverse than women. A truly diverse board will balance a need for excellence in governance with diversity of backgrounds – not simply gender.
- Every director is responsible for every aspect of governance: training is the way to make that happen. It has long been my strong view that every board member needs to be responsible for all matters relating to governance and oversight. For example, there cannot be excessive reliance on a few finance experts to handle financial issues. Every board member must at least understand and consider the financial issues. The Davies Report helpfully acknowledges that no director knows everything, but that skills (including financial skills) can be learned through well-designed training. The Davies Report addresses this issue via the problem of recruiting competent women. I believe boards in general are under-trained and not up to date on governance best practice. We all have our strengths and weaknesses. Almost every corporate director (not just women!) could benefit from reinforcement in one area or another. Training is even more important in the non-profit world as it remains a sector-wide weakness, particularly in organisations where board recruiting focuses on sector expertise at the expense of governance experience.
- Nominating Process. I highly recommend that even small non-profit boards form nominating committees that consider broadly the profiles necessary for the particular organisation and open, accountable recruiting processes. The Davies Report reprimands the on-going statistics regarding recruiting on the basis of personal contacts. This persists in the non-profit world as well.
- Regulation and Sanctions. Internationally, for example in France, Spain and Norway, there are more specific quotas and sanctions for failure to comply. These trends need to be kept in mind in the corporate and non-profit sectors as the UK position evolves – again in both the for-profit and non-profit sectors. I do not assess here the validity of quotas in other national settings.
The Davies Report should be kept alive as part of ordinary course board reflection for many non-profit organisations. Use it to assess your current board situation and set goals – in recruiting objectives, process, and transparency. Keep an eye on the evolution of the issue in the for-profit world internationally.
Copyright 2011 Susan Liautaud. All rights reserved
 Women on Board, independent review, by Lord Davies, http://www.bis.gov.uk/assets/biscore/business-law/docs/w/11-745-women-on-boards.pdf
 Women on Boards, independent review, by Lord Davies, http://www.bis.gov.uk/assets/biscore/business-law/docs/w/11-745-women-on-boards.pdf, page 18.
 Ibid, page 5.
 E.g. Women Take the Lead in Couples’ Charitable-Giving Decisions, Paula Wasley, The Chronicle of Philanthropy, May 19, 2009, http://philanthropy.com/article/Women-Take-the-Lead-in/63093/, downloaded April 24, 2011.
 Davies Report citing Brown, D., Brown, D. And Anastasopoulos, V. (2002) Women on Boards: Not just the Right Thing…But the “Bright” Thing, Report 341-02: The Conference Board of Canada, Ottawa, Davies Report, page 10 (footnote 22). Also, Diversity and Gender Balance in Britain plc: a study by TCAM in conjunction with The Observer and as part of the Good Companies Guide, London, UK: TCAM: 2009, Davies Report page 9 (footnote 14).
 Principles For Good Governance and Ethical Practice, Independent Sector,
https://www.independentsector.org/uploads/Accountability_Documents/Principles_for_Good_Governance_and_Ethical_Practice.pdf, page 2, downloaded April 24, 2011.
Leave a ReplyWant to join the discussion?
Feel free to contribute!