There is more to be done to increase representation in life sciences
Women’s representation at the higher echelons of corporate decision-making has long been an issue across all sectors of the EU. For life sciences in the UK, there are signs of real improvement, but for meaningful change the industry needs to shed its reliance on personal networking and cast the net wide.
In November 2013, the European Parliament voted with a decisive majority to back the European Commission’s (EC) proposed law. This law was designed to shatter the glass ceiling that continues to bar female talent from the highest levels of corporate influence.
While the proposal still needs to be jointly adopted by European Parliament and EU Member states in the Council before it is enshrined in law, the suggested legislation is already sending a strong signal to all industries operating in the EU.
Since the directive was first floated in 2012, there have been encouraging signs in board rooms across the EU. The share of women representation in the largest publicly listed companies has risen by around 34% to reach an average of 18.6% last month, according to official figures.
The figures also reveal a lot of variation between countries. Latvia tops the list, with a 31.4% share of female representation on boards. Meanwhile, Malta languishes at the bottom of the list, at 2.7%. The UK is currently above average at 22.7%, but with what could be a minimum target of 40% representation for women on boards by 2020, there is a long way to go for most nations.
How do UK life sciences fare
Our recent study, The RSA Group Non-Executive Directors’ Survey 2014, aimed to find out, while also seeking to understand what motivates independent board directors in their roles, what makes them attractive to companies, and how their demographics and backgrounds impact corporate decision-making.
The UK market is particularly interesting because of Lord Davies’ Women on Boards report. Launched in 2011, the initiative seeks to reach a target of 25% women’s representation by 2015, through a business-led voluntary framework as opposed to the EU proposal.
On the surface, the results are promising. Our research, conducted in the UK among 153 non-executive directors (NEDs) representing 352 private, public and charitable boards, revealed a 33% rise in the proportion of women serving in non-executive roles on life sciences boards since 2012.
Although the increase is undoubtedly positive, according to our survey, the average proportion of level of female representation by NEDs on boards now lies at only 16%. That is to say, 6.7% below the UK average for all industries when compared to EC figures. The figure is also woefully out of synch with the gender balance within the life sciences industry as a whole.
A closer look at the figures reveal more concerns. Demand for women on the board may be up, but opportunities for new female NEDs are still in very short supply. Every woman who completed the survey had seats on several other boards. So while there are more women appearing on boards, chairs are recruiting from the same (small) pool of people.
We also found a notable discrepancy between the ages of male and female NEDs. The age of the average NED is falling, with one in six men serving as NEDs in their 40s. Conversely, the female board members who contributed to our study are all over 50.
Regardless of gender, experience is a prerequisite to secure a place on a board. According to our research, boards value experience in the industry above all else when recruiting NEDs, with 70% of respondents saying that knowledge of the life sciences is essential.
Commercialisation expertise, experience with partnerships, and strong personal networks are the next-most-desired traits for an independent life sciences board member, with some 58% of survey respondents agreeing that each of these traits are crucial. Legal and financial experience is also considered by almost half of respondents (45%) to be a vital component on non-executive boards - particularly for those with audit, remuneration and related committees.
Despite the stringent and specialist requirements, chairs seeking new NEDs do not tend to search professionally to find experts with these qualifications. Instead, nearly three quarters (72%) of NEDs rely on their personal networks when getting their first board appointments. This is perhaps unsurprising when one-third of survey respondents are concerned that there are no succession plans in place for replacing independent board members.
Our survey also found that fewer than half of NEDs surveyed, stated they are regularly assessed or given formal performance reviews. As a result, professional NEDs tend to take responsibility for their own development; with the vast majority of respondents urging their peers and aspiring NEDs to invest in professional development, mentoring and coaching before taking up a board position.
Improve assessment, development and recruitment
Despite the UK Corporate Governance Code requirements for robust assessment, appraisal and recruitment of NEDs, our research suggests that chairs continue to rely on ‘fireside chats’ and personal networks. More must be done to encourage chairs to recruit new and experienced life sciences experts to their boards, and to address diversity when doing so.
Best practice shows that diversity and expertise are vital to effective corporate governance: this means chairs should stop relying on closed networks and limited talent pools to find and develop their next generation of NEDs. The proposed EC directive will focus on introducing transparent and fair selection procedures for those boards that fail to meet target levels of women representation. Few would disagree that companies with independently vetted and trained non-executive board members will benefit from new perspectives and a wider range of experience in making the most of commercialisation opportunities.
Although NED recruitment in the life sciences has a way to go before it reflects best practice, our survey shows that public companies are increasingly conducting far more extensive and thorough searches for their NEDs in order to comply with UK Corporate Governance Code requirements. Although most NEDs found their first position through personal networking, our survey indicates that chairs no longer agree this is the best strategy to find the best candidates. Being approached by an executive search company is now the second most common way in which NEDs are placed in their first role.
I meet with world-class board members every day, yet it never ceases to amaze me that more companies don’t apply the same rigour to finding and hiring these folks as they do in staffing their executive teams or safeguarding their intellectual property. Experienced NEDs with deep industry knowledge and thorough contact books are every bit as valuable to life sciences companies as strong COOs or innovative new therapies.