Business Secretary Vince Cable today launched a new code of conduct for head hunters and executive recruiters in a bid to support more female appointments to FTSE 350 boards, reports ibtimes.co.uk.

The Enhanced Voluntary Code of Conduct for Executive Search Firms comes after more than 70 firms signed up to the original voluntary code of conduct in 2011. Under the existing provisions, firms commit to:

Succession Planning – Search firms should support chairmen and their nomination committees in developing medium-term succession plans that identify the balance of experience and skills that they will need to recruit for over the next two-to-three years to maximise board effectiveness.

Diversity Goals – When taking a specific brief, search firms should look at overall board composition and, in the context of the board’s agreed aspirational goals on gender balance and diversity, explore with the chairman if recruiting women directors is a priority on this occasion.

Defining Briefs – In defining briefs, search firms should work to ensure that significant weight is given to relevant skills, underlying competencies, and personal capabilities, and not just proven career experience, in order to extend the pool of candidates beyond those with existing board roles or conventional corporate careers.

Long Lists – When presenting their long lists, search firms should ensure that at least 30% of candidates are women; and, if not, should explicitly justify to the client why they are convinced that there are no other qualified female options, through demonstrating the scope and rigour of their research.

Candidate Support – During the selection process, search firms should provide appropriate support, in particular to first-time candidates, to prepare them for interviews and guide them through the process.

Support Candidate Selection – As clients evaluate candidates, search firms should ensure that they continue to provide appropriate weight to intrinsic competencies and capabilities, supported by thorough referencing, rather than over-valuing certain kinds of experience. Search firms should, as necessary, advise their clients on how to run their interview process to demonstrate the required rigour and professionalism and to avoid unconscious gender bias.

Induction – Search firms should provide advice to clients on best practice in induction and ‘on-boarding’ processes to help new board directors settle quickly into their roles.

Embedding Best Practices – Search firms should ensure that best practice is supporting clients on enhancing Board gender diversity are well-documented and shared internally, and the adherence to the Code is effectively monitored.

Signalling Commitment – Search firms should signal their commitment to supporting gender diversity on Boards through their websites and marketing initiatives as appropriate and are encouraged to invest time into developing relationships with the pipeline of future female candidates. 

The new code is in response to the independent review conducted by senior HR executive Charlotte Sweeney in February 2014.

Mr Cable said: "Executive search firms are crucial to achieving gender diversity in both executive and non-executive roles. Recruiters can best show their commitment to this work by embracing this new enhanced code."

The amendments to the code are:

Search Firms should, in collaboration with their clients, discuss each woman on the long-list and aim to have at least one woman whom they would ‘strongly recommend’ the client should meet and put forward onto the shortlist of all executive searches for board positions.

The code, as it stands, should be considered to be the minimum standard and, as with the original code, search firms should work together and articulate the requirements of an upper tier to the code including how assessment should be made as to whom should become part of a ‘supergroup’.

Throughout the interviews there were numerous discussions relating to what happens at each stage of the search and hiring process e.g. long-list, short-list and hire. Search firms should be encouraged to capture this information and to share their statistics with Government as and when requested.

Through the analysis of the search firms’ websites only 25% stated their commitment to the voluntary code, which is the final provision. Only 12% shared any data to show their success rates of hiring women to board positions.

• Search firms should be more overt on their websites, marketing literature and when talking to clients about their commitment to the code.
• Search firms should be encouraged to share their hiring data as well as some narrative and case studies of successes.

Search firms are ultimately there to deliver the requirements of their clients. To this end all FTSE 350 companies should challenge the search firms further to deliver against the codes provisions. Companies should include a statement in all search contracts or agreements clearly articulating they will comply with all aspects of the voluntary code and explain if unable to do so.

Some stakeholders continue to argue there are an insufficient number of ‘board ready’ women out there with the required skills for a FTSE 350 role. To support achieving the 2015 target a database of women with the skills to take a FTSE 350 board position should be created. The database creation should be led by the Lord Davies Steering Group and would be in addition, and complimentary, to what is already available with the aim of connecting board chairs with talented women.

Through the interviews a small number of the more enlightened Investors were actively asking FTSE organisations what they were doing to create more gender diversity within the board and to comply with the aspirations of the Lord Davies review. However, a number of the investors may well have limited knowledge about diversity and what good looks like.

• The Investor community should play a more active role on this agenda and challenge businesses further on their plans and actions to create more gender balanced boards
• The Lord Davies Steering Group should create information for the investor community on why gender diversity is important on corporate boards, including the right questions to ask, what they should be looking for and what a good response sounds like.

Throughout the interviews there were a number of discussions regarding the 30% long list and ‘women only shortlists’. There have been differing legal opinions as to the ability to request ‘women only shortlists’ as an appropriate means to redress the balance on boards. The Equalities and Human Rights Commission (EHRC) should create the appropriate guidance required.

There is limited visibility of the code and those interviewed found it difficult to find the code or details of the signatory search firms. To ensure this has clear prominence a section within the Government (BIS) website should be created to publish the code, the signatories and case studies of how the code is working in practice.

The FRC UK Corporate Governance Code stipulates “the search for board candidates should be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the board, including gender”. The Voluntary Code for Executive Search should be referenced on the FRC website and within the FRC Guidance on Board Effectiveness when it is next updated.

Kate Shoesmith, Head of policy at the Recruitment and Employment Confederation (REC) commented: “The new enhanced code is a step in the right direction. However, it sets a number of challenging targets for executive search firms which won’t be achievable without the endorsement and co-operation of their FTSE 350 clients.”

“We know that there is still a lack of understanding about the executive search process and what ‘good’ looks like. We made a strong recommendation earlier this year that the gender balance of long and shortlists should be published so that executive search firms who consistently put forward balanced shortlists can be recognised, even when the client may not ultimately choose to hire women.”

“Our role will be to raise awareness of the enhanced code, encourage our industry to continue to challenge biases and support businesses to improve gender equality in their boardrooms. At a time when skills and talent are in high demand, employers cannot afford to miss out by not accessing the widest talent pools. We will continue to work with the Davies Steering Group and the Department for Business, Innovation and Skills (BIS) to monitor progress,” she concluded.  

For more information about the Sweeney report, click here.