Diversity at senior executive levels stalled
17 Jul 2019
Progress on improving diversity in senior roles at the UK’s largest companies has stalled according to two research reports, with one estimating FTSE 350 boards are unlikely to achieve gender balance before 2090 at the current rate
17 Jul 2019
Diversity specialist The Pipeline says its fourth annual Women Count report, tracking the number of women in executive positions and on executive committees, shows little to no progress in redressing the gender imbalance.
It found only 3.7% of FTSE 350 companies have female CEOs, down from 4.6% two years ago, while more than 85% of companies have no women executives on their main boards.
Only 9% of executive directors on main boards are women, unchanged since 2017. Just 17% of FTSE 350 executive committee members are women, up by only 0.8% since last year, while one in five companies have no female members of their executive committees at all.
Just 5% of executive committee positions are held by women with profit and loss (P&L) responsibility and over half of FTSE 350 companies have no women on their executive committees in a P&L role.
The situation at the biggest banks has also deteriorated, with the report identifying a drop of 5% in women’s representation on executive committees at banks (down to 20% from 25% in 2018). In addition, the representation of female executive directors at board level almost halved compared to last year (5% in 2019, down from 9% in 2018).
Lorna Fitzsimons, co-founder of The Pipeline, said: ‘When over 90% of men hold all the major positions from CEO, executive director and P&L roles there is something seriously wrong.
‘Businesses severely limit the talent they attract and retain as well as their bottom line when they exclude women. It’s time for the government and fund managers to force change.’
To address the issues, The Pipeline says the UK government should adopt a target of 33% women on executive committees as a requirement in public procurement for organisations with annual turnovers in excess of £100m.
Pension fund trustees should require their fund managers to have 33% female partners making their investment decisions, and fund managers should take the 33% minimum target of women on executive committees into account when making investment decisions.
In addition, FTSE 350 companies should be set minimum targets of 33% female representation on their executive committee and at least one woman executive director on their main board.
There is a wider problem with the absence of genuine diversity at the top of British businesses, according to a report from ICSA: The Governance Institute, London Business School’s Leadership Institute and Elisabeth Marx Associates.
Based on comparisons with a 1996 survey on the composition of FTSE 100 boards, it found that while there has been progress in gender diversity at non-executive director level, boards remain more obviously male, as well as significantly whiter than the British population. In addition, directors are increasing in age, with little diversity in terms of educational or career background.
Professor Randall Peterson, academic director, London Business School Leadership Institute, said: ‘In many of the headline-grabbing areas that the initial 1996 research uncovered, there has been genuine and sometimes radical change, such as the increase of female directors from 4% to 28% and international experience in the boardroom climbing from 24% to 57%.
‘In other areas, however, little has changed: a quarter of all directors are educated at Oxbridge or Harvard and the percentage of female executive directors has climbed from 1% to just 3%.
‘Alarmingly, in some ways the boardroom is becoming significantly less diverse, such as the increase in the percentage of directors with a background in finance and a growing lack of international experience, which could potentially narrow the focus in British boardrooms.’
The analysis of board changes between 1996 and 2017 found 28% of board directors are women compared to 4.1% in 1996.
However, the age profile has not changed: the average age of a FTSE 100 board director is 58.5 years compared to 56 in 1996; non-executive directors are on average 60 years old and executives 53 years of age (unchanged from 1996).
Directors with an accountancy or finance background predominate (49%, up from 38%), and 57% of current directors have international experience, more than twice the percentage in 1996 (24%).
The research shows the majority of board directors are university-educated and a considerable number hold degrees from top international universities and business schools (including Oxbridge, Edinburgh, Harvard and other top US universities, and international business schools such as INSEAD and LBS).
Peter Swabey, ICSA policy and research director, said: ‘One way that boards are judged is whether they represent the population they serve. We have come a long way since 1996, but there is still a distance to go.
‘The narrow focus on getting women into non-executive roles, for example, seems to have inhibited the progression of women into executive roles.
‘This suggests that any future diversity initiatives, whether focusing on gender, ethnicity or age, should consider the potential downsides right from the outset.
‘Given the pressure on boards to better reflect the customers they serve and public pressure to address social issues such as climate change, should we expect greater racial and ethnic diversity on boards, and companies to be taking a stronger hand in addressing their carbon footprint in another 20 years’ time? The answer is undoubtedly “yes”.’
The Treasury has launched the Investing in Women Code, designed for all organisations that finance entrepreneurs, as part of efforts to encourage female entrepreneurship.
Signatories to the new code commit to promoting female entrepreneurship by having a nominated member of the senior leadership team who will be responsible for supporting equality in access to finance.
They also agree to increasing the transparency of financial services firms’ data concerning support for female entrepreneurs, and to adopting internal practices to improve the outlook for female entrepreneurs.
At the launch, the first tranche of signatories – which included Royal Bank of Scotland, Barclays, Lloyds Banking Group, Santander, TSB, Metro Bank, the Co-operative Bank, Nationwide and Bank of Ireland UK – signed up to the Investing in Women Code, alongside venture capital firms Frontline and Episode 1, as well as angel networks UK Business Angel Association, Angel Academe, and British Business Bank.
The Treasury said trade bodies will be working closely with their members in the coming weeks and months to establish a collectively agreed set of metrics that are comparable across organisations and useful for understanding the landscape of female entrepreneurship financing. Trade bodies will be bringing together their members to establish and promote good practices to enable female entrepreneurs to successfully access the tools, resources, investment and finance they need to build and grow their businesses.
The Treasury will publish the first annual report in autumn 2020. This initiative is complementary to its Women in Finance charter which promotes gender equality for employees within firms in the financial services sector and currently has more than 330 organisations signed up.
Pat Sweet | 17-07-2019