Board diversity needs stronger pipelines

Sir Philip Hampton and Dame Helen Alexander have released their recommendations for boosting UK board diversity with a stronger pipeline of women. Their report follows on from the progress made by the Davies review by focusing on increasing the number of female executive directors and broadening the scope to the entire FTSE 350.

In addition to backing the Davies recommendations of 33% of female directors in the FTSE350 by 2020, the Hampton-Alexander recommend that FTSE 100 companies should have at least 33% of their executive pipeline positions filled by women by 2020.

Research shows that the rate of increase of female board appointments has slowed in the last 12 months, particularly in the FTSE 100. The FSE 350 overall is at 23%, up from 21.9% this time last year. The FTSE 250 is at 21.1%, up form 19.6% with the FTSE 100 only marginally up at 26.6%

To support the changes, the report also recommends that the Financial Reporting Council (FRC) should amend the UK Corporate Governance Code so that FTSE 350 companies disclose the gender balance of their executive committees and to improve transparency around how many women are in senior positions.

in light of the current public debate on corporate governance, the FRC said that it was ready to revise the UK Corporate Governance Code following consultation. Its work on succession planning this year suggested that nomination committees needed to take a more active interest in talent management; in particular they needed to ensure that initiatives are in place to develop the talent pipeline and to promote diversity in board and executive appointments.

Disclosures show lack of progress on diversity

In a survey of FTSE 100 companies carried out for the Hampton-Alexander review  it was found that of the 92 companies that provided data, the combined representation of women on the executive committee and women who directly reported to the executive committee (direct reports) was 25.1%. There was stronger representation of women in the direct reports at 26% women, but less strong on the executive committees with only 18.7% of women, the survey found. In the Female FTSE Board Report 2016 produced by Cranfield University there were 12 companies with all-male executive committees within the FTSE 100, including Babcock International Group and Royal Dutch Shell.

The review team will continue to track progress and anticipates increased levels of transparency during the year from all FTSE companies on websites and in their annual report and accounts. A further report will be published again in the autumn of 2017.

Mentoring scheme to boost opportunities

To support the work of the  review the government, 30% Club and Board Apprentice has also launched the Future Boards Scheme, giving senior women a unique opportunity to get board experience to progress their careers to the next level. The scheme is not solely aimed at FTSE 350 companies, but can be used by SMEs and other major organisations.

Sir Philip and Dame Helen said:  “It is clear that the voluntary, business-led framework to improve the number of women at the top of British business is working and it is time to extend the focus beyond the boardroom. We are launching the next stage in the journey where FSTE 100 companies will aim for a third of their all-important leadership roles to be occupied by women by the end of 2020.

“We don’t under-estimate the challenge the new voluntary target presents for many FTSE companies. However, we are encouraged by the breadth of experienced women ready and willing to step up, the significant efforts underway in many companies on this agenda and the ability of British business to work together to bring about change when it is needed.”

Government backing for the proposals

At the launch of the Hampton-Alexander report Justine Greening, Minister for Women and Equalities, said: “No woman should be held back just because of her gender. It’s vital we help more women get into the top jobs at our biggest companies, not only because it inspires the next generation but because financially business can’t afford to ignore this issue – bridging the UK gender gap in work could add £150 billion to our annual GDP in 2025.

We’ve achieved amazing things – we now have a woman on every board in the FTSE 100 and we have the lowest gender pay gap on record. But we have to push further and focus on the executive pipeline. I am sure that the ambitions set out by Sir Philip and Dame Helen will help us get more women into those top jobs.”

Last Updated: 12 November 2016