In this article, WOB UK founder Rowena Ironside shares her personal perspective on boardroom ethics, and what you can do as a non-executive director to make change happen.
Women on Boards was founded to ensure more women make it into the boardroom so that the boards of the future are more gender-balanced. Whilst one driver is the inequity of the male-dominated leadership that has predominated for so long, the big win lies in the potential for new voices and diverse perspectives to raise organisational standards and ambitions, leading to a fairer society and a more sustainable economy.
As the importance of ESG rises up board agendas and regulatory changes add incentives and sanctions, we can all play our part in driving positive change as non-executive board members, particularly around the ‘S’ is ESG.
So where to start in challenging the status quo and raising the bar for ethical behaviour? Here are three ideas where as a NED, simply asking "Why", or saying “No, not good enough”, could make a real difference:
- How quickly and fairly are we paying our suppliers, particularly small ones?
- What is the pay differential between our chief executive and our workers?
- How does the gender and ethnicity of our leadership compare to our workforce and customer base?
Ethics can be a subjective topic, but the opportunity we each have as board members is to ensure our voice is heard when something feels wrong/unjust to us. A lot of bad behaviour has been justified in the past in the interests of shareholder returns. Thankfully, the consensus has moved on in many countries and it is now broadly accepted that enriching shareholders is no longer a valid excuse for questionable or unethical behaviour.
One of the roles that Women on Boards can play in this context is to give you confidence that your opinion is not an outlier (do you sometimes find yourselves wondering ‘am I the only one that thinks this needs to change’). Our peer groups and one-on-one support provide avenues to speak with other non execs. It is also worth reminding yourself that your role as a non exec is not to ‘know the right answer’ but to bring your unique perspective, experience and values to a discussion to help the board arrive at the best decision.
Supplier payment practices
Despite recent regulatory guidance, many large companies continue to use their suppliers as a free source of finance in breach of payment terms. At Women on Boards, we have one or two corporate customers (with income in the billions of pounds) who chose to delay payment for our services for 6, 9 or even 12 months. And this is pretty common, along with the practice by large corporates of insisting on supplier contracts with unreasonable payment terms. Too many finance directors believe that ‘managing cash flow’ in this way is simply part of doing a good job.
What can you do? Ask the question “can you confirm if we pay all our suppliers within 30 days?”. If the answer is not satisfactory, make it clear that you believe it is an ethical failure to use suppliers as a source of free finance and point out that this sort of treatment of small companies can drive them to bankruptcy – most don’t have the luxury of a strong balance sheet.
One of my favourite quotes of 2021 came from Fortune magazine - which has recently appointed its first female Editor-in-Chief, Alyson Shontell:
“[And after all,] if your profitability depends on paying workers less than a living wage, then maybe it’s time to rethink your business model”.
How many times have you heard senior executives convincing each other that they cannot afford to raise front-line employee pay? Whilst paying themselves extraordinary multiples of those employees who are the primary producers of value in the organisation.
Ask to see pay differential numbers (CEO vs average of non-management employees) and question them. Both headhunters and senior executives have incentives to inflate executive pay. As non-execs we need to challenge this dynamic where it has got out of hand.
Myths of merit
Given the long history of white patriarchy it will take time for more diverse talent to make it to the top of organisations, but beware the myths of merit on the way. They tend to perpetuate the status quo:
Merit is an objective standard
Merit is what determines who gets to the top
Everyone is competing on a level playing field
So if you find yourself part of a discussion about the need for targets or quotas to rectify an imbalance in the diversity of a team or a board, don’t fall into the trap of believing this will undermine merit; know that it might actually be the best way to achieve it.
A final word
Challenging the status quo can feel very uncomfortable, even for experienced board members. As well as using the Women on Boards network for insights and support, identify others on your board who are likely to be supportive and form a coalition.