More to do as boards hit gender targets one year early

Despite London-listed companies hitting the one third target of women on their boards, the number of women in senior roles such as finance director remains below target, while progress on ethnic diversity is equally slow, writes Julia Root Gutteridge of the ICAEW Business Team.

March 2020

February brought good news on how much progress London-listed boards have made towards a better gender balance. The Hampton-Alexander Review, backed by government and which set targets for FTSE 100 board roles to be held by women, has reported that a third of all board positions in the FTSE 100 were now held by women. This means that a key target of the review has been met a year early.

It’s reassuring to see this progress but there are almost daily reminders of how much more there is to do. The review also reported that representation of women in senior roles, such as finance director, within these organisations was below the target – 15% of FTSE 100 FDs are women.

It’s a steeper climb to equality in AIM listed companies, where a mere 15% of directors are women, and over a third of companies listed on the market have all-male boards.

Progress on ethnic diversity is also slow. The Financial Reporting Council recently described most UK companies’ approach to board ethnic diversity as “unsatisfactory” when it reported that just 14% of FTSE 100 companies set measurable objectives for board ethnic diversity.

For FTSE 250 companies the figure is a meagre 2%. When even objective setting to make boards more ethnically diverse is still so rare, it’s clear there is still a steep mountain to climb.

Real diversity

It’s crucial that talented, ambitious people are not held back from success by circumstances beyond their control, and that our business leadership better reflects society. Yet true boardroom diversity is broader than this.

As well as having a balance of genders, ethnicities, backgrounds and ages, boardrooms also need diversity of skills, experience and knowledge to be successful. Diverse boards are known to deliver better results for shareholders, but diverse backgrounds don’t automatically equate to the cognitive diversity boards desperately need.

Businesses need both to face the disruptive environment in which they operate. Issues such as climate change, sustainability, cyber risk and technological change are demanding more time in the boardroom and require specialist experience and expertise to mitigate risks and harness opportunities. To thrive, boardrooms need directors with a range of experience, including from different sectors and countries, to share their experience and best practice.

Some sectors, such as automotive and aviation, will have had climate change and environmental impact on the boardroom agenda for a decade or more. Directors from such boards, who are adept on approaching those challenges, could greatly benefit boards in different sectors which are only just grappling with the challenge of meeting a carbon-neutral target or managing their supply chain’s exposure to environment changes.

How boards ensure they have the skills and crucially the right dynamic to face these challenges is an issue we will explore at ICAEW’s first ever Corporate Governance Conference, on 3 November in London. If you want to hear more about this, please register here to hear more as the programme is announced.

Julia Root Gutteridge is ICAEW manager for board effectiveness

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