By Anne Tolmunen, portfolio manager, Framlington Equities
Having a balanced, diverse workplace offers a huge range of advantages. Not only has it been shown to enhance staff engagement and retention, but it can also improve innovation, client alignment, brand reputation, governance standards and risk adjusted financial performance.
The benefits stretch far beyond the workplace, though. Companies who provide women with better opportunities drive positive change in the society as a whole. As well as driving the expansion of household wealth and disposable income levels, through consumers with higher purchasing power governments benefit from higher tax receipts.
However, despite the obvious advantages, progress has been slow. A lack of data sets means it has been difficult to compare and contrast progress and shine a spotlight on those who fail to improve.
At the moment, all we mostly have is very high-level data about how many women are on boards and executive committees. While this is a good starting point, we need more granular data that is meaningful, comparable and actionable, and we need the data to be available across many companies. For example, the numbers of female managers – and/or potential targets – as well as a female talent pipeline.
Access to this level of data would give us a real idea of which organisations are truly doing a good job of fostering gender diversity. For example, having an idea of the number of women in managerial roles across an organisation would reveal whether a firm has even proportional representation throughout a workforce’s hierarchical pyramid. There is a danger that by just looking at board level, firms that do improve diversity in that one area may feel that the buck can stop there.
The good news is that the depth and breadth of data are improving – albeit slowly. Companies are waking up to the fact that investors are increasingly crying out for such figures. Governments are doing their part, too - the gender pay gap reporting introduced in France and Britain is pushing companies for more transparency and granularity.
We are now witnessing a knock-on-effect that such initiatives are having, which creates a virtuous circle. The more granular the data becomes, the more transparency you get. This helps allow for more meaningful comparisons across sectors and countries, which in turn leads to greater accountability – a big step towards resolving these issues.
In the UK, the gender pay gap disclosure has sent a strong message to companies that they need to take these issues seriously. Employees and future employees will examine these figures and it’s likely it will shape how they view and feel about a company. Understanding this, we are seeing more firms – and I expect this will grow over the years – providing additional information to shed light on the numbers and explain them, as well as create and share plans around what they are doing to close the gap.
It’s important in the race for more data though that we don’t simplify the issues we are analysing. This is not just about increasing numbers of data sets but also about understanding the limits and implications of what is being measured. For example, we should look well beyond data on company diversity policies and focus instead on measurable diversity outcomes.
From an investment standpoint, when we look at our universe of companies, we need to put data and information into context. Particularly as there is a large cultural context pertaining to gender diversity. It might not be fair, for example, to compare a company in Japan to one in Norway. The starting points are very different. It’s important to recognise companies that are leading the way within the context of their country or their industry. Again, certain industries like mining might have very different challenges and starting points than sectors exposed to consumer industries, where you traditionally find a majority of women as employees and customers. Also, in countries with quotas, we put less emphasis on the board and look more at what companies are doing from within, to grow their female pipeline and promote their female talent to senior roles.
Again, we believe it goes back to that virtuous circle effect. Better data disclosure will help catalyse progress by shedding light on issues which companies will feel compelled to rectify.
Shareholders certainly have a role to play by proving the demand for such data by directing capital towards companies with better practices and better corporate culture. Not only is it the right thing to do, but investors should also benefit over time, as studies have shown there is a link between greater diversity and improved performance. The next frontier will be the effective capture of other measures of diversity – focusing on more balanced gender representation is necessary but not sufficient. We are in the early days of data sets that seek to document racial and ethnic diversity, age, and educational background. These other dimensions of diversity in the workplace will someday give us additional insight into how companies are organizing themselves to tackle tomorrow’s challenges.
Growing the pie for everyone by levelling the playing field for women and paying them fairly creates a positive feedback loop from which we can all benefit.
