On the front line of boardroom change

FTSE 100 companies, particularly at executive and governance level, are notoriously white, male domains. But psychologists have become an integral part of actively challenging this status quo, working at senior government levels.  

Two psychologists in particular have been involved with shaping the ways FTSE governance boards can become more diverse, in both ethnicity and gender. Dr Doyin Atewologun (Queen Mary, University of London) has been involved with the Parker Review, which is exploring ethnic diversity on boards and gathering information on where some of the country’s largest companies stand on diversity.

Her PhD focused on the leadership identities of black and Asian men and women in senior management positions. As a result her former PhD supervisor Susan Vinnicombe, Director of the International Centre for Women Leaders, recommended her to be part of the government review and Atewologun is now Research Lead on it.

Atewologun’s research has developed an index of black and minority ethnic people on FTSE 100 boards and compared this with gender trends for boards. She told The Psychologist: ‘I’m now looking for a way to capture the lived experience of directors, whether this be their career journeys or their specific experiences of the selection and board appointment process.’ The whole report should be released later this year.

Psychology has been central to such research, Atewologun notes, and to the potential strategies that will eventually be used to encourage chairpersons to diversify their boards. ‘There’s really significant and untapped potential in psychology. If we look at board-level dynamics, or any dynamic between groups, psychology has so much to say around decision-making, biases and assumptions. It can contribute so much to sense-making around data and communication, and how we deal with perceived differences, social and cognitive. In many ways it’s more of a psychological issue than anything else,’ she said.  

Psychology has also given us evidence that diverse boards can be much better boards, Atewologun added: ‘Quite a lot of research says that greater diversity, managed and harnessed effectively, results in better-quality decision-making and enhanced innovation.’ Dr Ruth Sealy (City University London) has worked for many years examining and encouraging gender diversity on FTSE boards. Most recently she has been involved with the Davies Review, and subsequent Davies Report, which set a target in 2011 to have 25 per cent female board membership by 2015, as well as giving 10 recommendations of how boards could affect this change.

During this review Sealy examined various aspects of gender diversity on boards, including the appointment process and code of governance. She also worked with the media to encourage a change in discourse around women in these positions: ‘They changed the language they used from “Why do we need to do this?” to “How do we do this?”,’ she said.

Last year the 25 per cent voluntary government target for boards was exceeded hitting 26 per cent, as an aggregate across the FTSE 100 companies, with a range in female board membership of between 10 and 50 per cent in individual companies. The next target is to increase this to 33 per cent by 2020 in line with an EU Directive, and despite Brexit this target will still stand for the Hampton Alexander Review to tackle this.  

However, it is clear that after the closing of the Davies Review in October 2015 progress on the numbers of women on boards has stalled. Sealy said: ‘We made progress because numerous stakeholder groups were engaged in the change process. Our latest Female FTSE Report (http://tinyurl.com/jtezukh) reveals that if you take your foot off the pedal things slow down, the forces of inertia are great. Unless you consciously and proactively manage increasing diversity, it will not happen.’ Sealy said she sees her role as quashing the myths in this area.

Psychology has had a direct impact in the world of FTSE 100 board gender diversity and one of the biggest practical changes, which Sealy has been involved with, is companies having more transparency about their governance. The Financial Reporting Council, thanks to evidence Sealy gained in Australia, now asks members to include the percentage of men and women across all levels of the company in their annual reports. They also have to have a diversity policy, stating what they as a company are doing to increase diversity year–on- year and report progress; As Sealy said: ‘It’s not so much a nudge, as a huge shove.’  

The recent British Psychological Society response to the non-financial reporting consultation this year made similar representations to the UK government for both gender and ethnicity.

Meanwhile the BPS Board Effectiveness Working Group, chaired by Professor Ros Searle (Coventry University) and Michael Webster, has been actively addressing the psychology of governance, decision-making and board effectiveness. The group is currently developing a report. Searle told The Psychologist: ‘Trust is critical to governance, but our work shows organisational control and external regulation can support trust, but are only part of the solution. We see trust and active distrust as an increasing problem for complex organisations to manage due to the scrutiny given to the symbolic actions of high-profile people.’

Dr Joanna Wilde (Aston Business School), a senior evidence-based organisational psychologist practitioner and also a member of the working group, said she hoped psychology could firmly position itself within this area to point out and examine psychosocial risks to board effectiveness. The new report will aim to explore these in more depth, and Wilde pointed to two clusters of these risks that warrant a psychosocial audit, rather like the finance audit already required.

She said: ‘The first encompasses psychosocial processes that impact information-processing, for example confirmatory cognitive bias which goes unattended and unmanaged. This can happen throughout the organisation skewing what gets reported upwards and also skewing what the board focuses on.’ The second, she added, are factors that impact negatively on employees themselves, for example through clues and signals, such as lack of transparency in board recruitment, overpayment of senior people and in the failure to manage workplace culture, distress and distrust.

Psychologists are already having an impact in this area, identifying barriers to board diversity and generating change through long-term monitoring, but psychological expertise has far more to offer in diagnosing and addressing the relevant individual and group dynamics that generate risk. ‘While lawyers suchas Chilcott can identify evidence of groupthink, it is psychologists such as Professor Jo Silvester (Cass Business School) that have shown how we actively change composition and competence in government. Far more is now required to enhance the psychosocial dynamics of top teams in organisations,’ Wilde said. 

- Psychologists who wish to contribute relevant material or evidence for the report should contact Professor Searle ([email protected]) with their suggestions. The deadline for these submissions is Friday 30 September.