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Women on boards: where are we now?
Practical Law UK Legal Update 5-619-5881 (Approx. 5 pages)
Women on boards: where are we now?
| Law stated as at 27 Oct 2015 • United Kingdom |
An extract from the trends report “Annual reporting and AGMs 2015, What’s Market practice?” to be published on 24 November 2015, giving an overview of progress made during the 2015 reporting season by FTSE 100 companies in achieving the voluntary target of at least 25% female board representation. This update includes insights and commentary from Susan Taylor Martin (President, Thomson Reuters Legal and Non-executive director, Whitbread PLC).
Unless otherwise stated, all analysis in this update derives from What’s Market.
Speedread
As the 2015 reporting season comes to an end and ahead of the anticipated publication on 29 October 2015 by Lord Davies of his closing report on women on boards, What’s Market has analysed the progress made by FTSE 100 companies in achieving the voluntary target of at least 25% female board representation by 2015.
As at 16 October 2015, key findings included that:
- There had continued to be a steady increase in the number of female directors on FTSE 100 boards.
- 57 FTSE 100 companies met the voluntary target set by Lord Davies, compared to only 38 as at 14 October 2014.
- Of the 1,099 FTSE 100 board positions, 289 (26%) were held by women.
- 90% of the 289 female directorships were non-executive positions.
- Of the 275 executive positions across the FTSE 100, 30 were held by women.
“In the UK we have certainly made progress in gender diversity at board level. However, the journey is by no means over. Not only do we need to continue to drive for greater female board representation, we also need to focus on the senior-executive level within companies, particularly at the operational level. This is crucial to create a pipeline for women to obtain those rare FTSE 100 executive board positions.” Susan Taylor Martin (President, Thomson Reuters Legal and Non-executive director of Whitbread PLC). |
The full version of the What’s Market trends report will be published on 24 November 2015. The report will consider key trends in relation to certain aspects of narrative reporting, the resolutions proposed and voting results during the 2015 reporting season.
The case for gender-balanced boards
In 2011, Lord Davies published his report “Women on boards” recommending that FTSE 100 companies achieve at least 25% female representation in the boardroom by 2015 (see Legal update, Corporate governance: Lord Davies' report on women on boards and Practice note, Gender diversity in boardrooms).
Since 2012, What’s Market has been monitoring the progress made by FTSE 100 companies towards achieving this target. Like many of the relatively small number of women directors in the FTSE 100, Susan Taylor Martin (President, Thomson Reuters Legal and Non-executive director of Whitbread PLC) has also been closely following developments and believes that the benefits of a gender-balanced board are clear.
"The business case for gender diversity in corporations is indisputable. Study after study has demonstrated that gender-balanced teams and corporate boards deliver better business outcomes by pretty much any measure you choose. Although correlation does not equal causation, the correlation certainly indicates that when companies leverage the power of diversity they are more successful.” |
Referring to a study undertaken by McKinsey & Company (see Article “Why diversity matters” dated January 2015), Susan notes that among the UK companies studied, for every 10% increase in gender diversity on the senior-executive team, there was a 3.5% increase in EBIT. However, today in the UK women remain under represented at leadership level accounting for an average of just 12% of the membership of senior-executive teams.
FTSE 100: Companies with at least 25% female directors
In the UK, considerable progress has been made in gender diversity at board level. As illustrated by the following graph, as at 16 October 2015, 57 FTSE 100 companies had achieved Lord Davies’ voluntary target of at least 25% female directors on their boards, representing a 50% increase in the number of FTSE 100 companies that have achieved this target since 14 October 2014.
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Of the 57 FTSE 100 companies that had at least 25% female representation on their boards, the companies with the highest percentage of female directors were InterContinental Hotels Group PLC with 50%, Unilever plc with 46% and Next plc and Kingfisher plc each with 44%.
FTSE 100: Female directorships
As at 16 October 2015, there were 1,099 board positions in the FTSE 100. As illustrated by the following graph, 289 (26%) of these board positions were held by women. Of the 289 female directorships, 90% were non-executive positions, which was comparable to 2014.
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From our analysis of the 289 female directors on FTSE 100 boards, What’s Market has determined that 30 hold an executive position. This represents 11% of the 275 executive positions held across the FTSE 100. As highlighted in the Cranfield University report The Female FTSE Board Report 2015 published in March 2015, over the last five years, there has been a steady decline in the number of FTSE 100 executive director positions and therefore the likelihood of women being appointed to executive directorships is reducing.
As shown in the following diagram, in addition to the 30 executive director positions, three female directors had been appointed chairman, with the remaining 256 holding non-executive directorships.
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FTSE 100: Multiple female directorships
From an analysis of multiple directorships in the FTSE 100, it is interesting to note that only 13% of the female directors held multiple FTSE 100 directorships. The 289 female FTSE 100 board positions were held by 254 women. Of the 254 women, 221 held single directorships, 31 held two directorships and two held three directorships within FTSE 100 companies. Of the 33 women who held multiple directorships, nine held an executive position with a FTSE 100 company.
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Looking beyond 2015
In light of the progress made to date, as reflected in the What’s Market data, Susan’s view is that the journey towards gender-balanced boards is by no means over. To achieve this she believes that executive leadership teams need to create a supportive culture, expecting women to hold the top jobs, investing in developing their potential and enabling them to forge executive leadership career paths. In summary, this can be achieved by:
- Active leadership from the CEO who visibly supports the advancement of women to the very highest level in the company.
- Creating a supportive and flexible corporate environment which includes investment in conscious and unconscious bias training for all.
- A robust talent management process which is transparent and meritocratic.
- Publishing measurable targets for female leadership representation and holding managers responsible for progress against those targets.
- Investing in female leadership development programs, although she feels that one needs to be careful not to signal that the women need to be "fixed", it is the corporation that needs fixing.
- Setting clear expectations of senior leaders that sponsorship of high potential women is a requirement. Indeed a culture of sponsorship should be a mandatory requirement for leadership progression.
- Taking active steps to mitigate the tendency for women to favour staff rather than line management roles. Although both types of role are clearly vital to a well-functioning organisation, Susan notes that only those roles with clear operational and P&L responsibility will provide the experience critical to enable women to achieve the highest level of leadership, both at senior executive and board level.
It is anticipated that Lord Davies will publish his closing report on 29 October 2015. What's Market will continue to track board composition within the FTSE 100. For further developments relating to board diversity, see Practice note, Corporate governance: Key developments tracker.