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Boardroom diversity: More action is needed

12 December 2016 by Sarah Gordon

Boardroom diversity: More action is needed - read more

One of the surprising findings from this year’s FT−ICSA Boardroom Bellwether relates to women on boards.

Nearly half of the FTSE 350 company secretaries who responded to the survey said that their boards do not meet Lord Davies’ target of having a quarter female representation. This target was met in the FTSE 100 in 2015, but has since stagnated, with women on the largest 100 boards now making up just over 26%.

Given that a target for the FTSE 250 has only recently been put in place, some outliers would be expected. But what is really surprising is that, of those who have not met the 25% target, more than a third have no plans in place to do so before January 2018.

Meanwhile, over a third – 39% – have no plans to do so at all. Such a lack of urgency is worrying. Sir Philip Hampton and Dame Helen Alexander, who took over from Lord Mervyn Davies at the head of the Women on Boards review last year, recently set much more demanding targets. The new goals are for one-third of FTSE 350 board members to be female by 2020 and, at FTSE 100 companies, for women to make up one-third of the employees who are on, or directly report to, executive committees.

The Bellwether research suggests such targets will not only prove extremely stretching – but that companies do not necessarily feel a great deal of pressure to meet them. The findings support persistent concerns that appointing more women to boards has had little effect on the gender imbalance at senior management level.

Research by Spencer Stuart found that in 2016 at the top 150 listed UK companies, although 30% of non-executive directors are women, only 8% of executive directors are. Meanwhile, the number of women on executive committees in the FTSE 100, according to the Hampton-Alexander review, has flatlined at 19% for the last eight years.

The Bellwether findings suggest that building a pipeline of ‘board-ready’ diverse talent is the key challenge to addressing this. Although most company secretaries surveyed consider their boards to be diverse in terms of gender, 42% of respondents said that their executive pipeline is insufficient to provide a sustainable pool of talented and diverse board members. And over half – 63% – said the pipeline is insufficient in terms of providing a pool of female executives.

Pro-active management of staff at an earlier stage of their career may be one answer to this challenge. Another could involve the Future Boards scheme, run by the government and the 30% Club, which campaigns to get more women into senior corporate positions. The scheme allows women to act as ‘shadow’ board directors for a year, thus gaining valuable experience and preparing them for a more formal board role.

Whatever form it takes, the UK’s biggest public companies must take more action to improve executive, as well as non-executive, diversity at their senior levels.

Sarah Gordon is Business Editor at the Financial Times

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