The FT–ICSA Boardroom Bellwether is a twice yearly survey that seeks to gauge the sentiment inside UK boardrooms. It canvasses the views of the company secretaries of the FTSE 350 to find out how boards are addressing the challenges of the economy and the wider business and social environment.
Questions cover a range of business and topical issues as well as specific governance issues to provide unique insight into what British boards are thinking. Whilst some questions change from survey to survey, the core remains the same to reveal trends and shifts in opinion.
Use the tabs below to explore the key findings of the most recent FT–ICSA Boardroom Bellwether Survey, published in July 2015.
Economic confidence is returning after a sharp fall in December 2014, but there is still some way to go until we reach the giddy heights of the summer 2014 survey results. Until the December survey when respondents were particularly gloomy about the global economic outlook, past Bellwether surveys had seen a steady increase in confidence in economic conditions, climaxing at 81% in July 2014. This dipped to 33% in December, but since a more decisive election result than was predicted, confidence is once again on the rise. This is particularly true for the UK economic outlook which has seen a 64% increase in terms of confidence.
This optimism is not translating into plans for expansion in the UK and Europe, however, with two thirds of businesses anticipating no change to their expansion plans as a result of the election. This could be down to nervousness around the UK’s position on membership of the EU, and 63% said that a UK exit would cause some or significant damage to their company. One of the top three manifesto commitments of the new Conservative Government that companies would most like to see carried forward is an EU referendum and there were calls for ‘a clear fact-based debate on the EU question’.
Companies would also like to see less red tape – the number one manifesto commitment that companies would like to see carried forward - and no change to corporation tax.
After three years of solid progress, confidence about appointing women to boards seems to be stalling. Despite consistent press attention, and after highs of over 50% for the last year, now just 42% of the companies that responded expect to meet Lord Davies' target of 25% of women on boards by 2015. A further 11% claim to have plans to meet the target in the next twelve months, but we are not as far forward as one might have expected with just a few months left to go. Explanations point to a perceived lack of appropriately qualified women, underpinned by comments that women would be considered, but that appointments are made on merit.
Wider business experience and geographical diversity remain the areas where we see the greatest levels of diversity boardrooms, but educational background and ethnicity are less of a focus. Only 23% of respondents feel their board to be ethnically diverse. Interestingly, confidence that the executive pipeline will provide a sustainable pool of talented and diverse board members has reached record levels, jumping to 41% from just 13% in December 2014.
Ethnic diversity should be an area of focus for nomination committees, alongside succession planning which has been announced as a focus of attention by the FRC in 2015–16. It was encouraging to see that the majority of those companies expressing a view regard external board evaluations to be constructive, with 70% seeing them as a catalyst for change. ICSA views external evaluation as a significant contributor to succession planning and director development, which brings vital objectivity and new thinking.
Boards' approach to risk reporting and management varies. Economic risk emerges as the top concern, with operations and reputation second and third. In terms of how risk is reported, 77% of boards receive regular updates from a Chief Risk Officer or equivalent, but only 30% of companies have a risk committee as a formal committee of the board. This could be because some boards take the view that risk is a matter for the whole board rather than a specific committee.
About three quarters of companies still consider that cyber risk is increasing with two thirds active in mitigating it. The Government’s 'Ten Steps' guidance has been of significant help, but there remains some way to go before the new Cyber Essentials scheme is similarly effective.
With regard to social media, we are seeing more engagement from boards but a third of companies remain without a social media policy that has been discussed at board level. Given that it is an increasingly hot topic in the press and among some advisers, it is surprising that some companies still regard social media as unimportant despite the reputational risks associated with it. ICSA believes that social media is an increasingly significant fact of life and that companies are well advised to look at this issue in much more detail.
Eight years on from the implementation of the company communication provisions of the Companies Act 2006, a significant number of shareholders still receive hard-copy communications. Some 21% of respondents reported that more than 50% of their shareholders still require paper rather than electronic communication.
Nothing much has changed in terms of proxy advisers. Over 50% of the companies that responded feel that their influence on shareholder engagement is negative.
Just 3% of FTSE 350 companies think Britain leaving the EU would be positive for their businesses but most are reluctant to speak out publicly. Read more about how UK companies fear speaking out on Brexit in these reports in the Financial Times, the Guardian and City AM.
UK campaign for women in the boardroom hits a wall. Not only do 31% of businesses responding to the twice-yearly FT-ICSA Boardroom Bellwether survey report that they will not meet the target set by Lord Davies of 25% women on boards by the end of 2015, 63% of those companies that are not expecting to hit the target also have no plans to do so in the short, medium or long-term. This is the most pessimistic result for the drive for greater gender diversity since December 2012. Read more about this and other Bellwether findings in Dina Medland’s report for Forbes.
74% of FTSE 350 companies anticipate improvement within the UK economy. Listen to ICSA's Research and Policy Director, Peter Swabey, discuss how the recent UK general election helped increase economic confidence along with other Bellwether findings in his interview with Share Radio.