Women on boards – Still some way to go

Board composition is recognised as key in ensuring good corporate governance and, in turn, strong company financial performance.

BDO has again joined forces with Norman Broadbent and the Quoted Companies Alliance to produce the second annual Board review, which looks at the current board make up of all UK listed companies as well as analysing the underlying trend.

Gender attracts more column inches than any other aspect of board diversity and it is encouraging to see that women continue to make progress within all indices, with more female non-executive and executive directors than twelve months ago.

“Big banks give less than 10% of top jobs to women”

Indeed, the FTSE 100 now has no all-male boards left and has hit the 25% target called for by Lord Davies in 2011. However smaller companies still have some way to go to match this achievement.

There continues to be a mixed picture across different industry sectors with women making progress in some but falling back in others, however overall the picture looks positive.

Boards continue to evolve as the demands on them increase with ever greater levels of public scrutiny. This is driving the need for greater diversity in their make-up and we are seeing companies responding to this pressure with more women, directors from a wider variety of backgrounds, and with tenure reducing as companies refresh their boards more frequently in line with the Corporate Governance Code recommendations.

“One woman at the top is enough for male bosses”

September 2015 marked the 20th anniversary of the Fourth World Conference on Women where world leaders gathered in China and pledged to do as much as they could to revoke laws discriminating on the basis of sex.

Whilst there has been significant worldwide progress establishing basic human and civil rights for women, equality in the boardroom still has some way to go. The headlines below attest that in the eyes of the media at least, more needs to be done.

“Fewer women leading FTSE firms than men called John”

So, is the picture really as bleak as the headlines suggest? This year’s Board Review shows that just 3.5% of chairs of UK-listed companies are women, with companies in the construction, leisure and utility sectors having no women in the role of the chair. Sectors including technology, and those traditionally male dominated sectors, such as industrial and resources, trail others in their having women on their boards. Most starkly AIM companies, often being younger businesses, have just 6.4% women on their boards, half as many as small cap companies and only a quarter of their FTSE 100 cousins.

However, despite this initial gloomy picture, efforts by companies to get more women into the boardroom are clearly making progress: over a quarter of board level directors in FTSE 100 companies are now women, with the retail sector leading the charge with 22.4% of women on boards across all indices. The proportion of females represented on plc boards has increased by 13% in the last year across the FTSE 100, FTSE 250 and AIM, putting FTSE Small Cap companies to shame with only an 8% rise.

Our research shows Lord Davies’ target has been met with 25.16% of executive and non-executive directors now being female as of the end of June 2015. Clearly the figure varies from company to company but there are now no all-male boards left on the FTSE 100 – despite there being 21 just four years ago.

Government research shows that the picture for women is not quite so rosy on the FTSE 250 index. The Women on Boards 2015 report shows that 32% of FTSE 250 board appointments were awarded to women in 2012/13, but this has slipped to 24% in 2014/15. Whilst there has been progress in achieving 25% representation on FTSE 250 boards – just 17 companies had achieved 25% or better in 2011 vs 65 in 2015 – there are still 185 companies which have yet to make the mark, and 23 FTSE 250 companies still have all male boards.

Amongst small companies the picture becomes worse for women: although the proportion of women on the boards of AIM-listed companies grew by 18.5% in 2015 (itself a significant improvement), this growth is on a very small base. AIM companies’ gender performance may be held back by the relative preponderance of resources, technology and industrial companies listed on AIM compared to the main market.

It is clear that the Government’s push to achieve greater diversity on larger companies’ boards is proving successful, but greater efforts need to be made to encourage diversity amongst their smaller-listed peers. Lord Davies has already stated that he is going to meet with the FTSE 100 bosses who have the most gender-diverse boards to understand how they have reached their diversity targets to help guide and advise FTSE 250 boards who are struggling with diversity – but perhaps this needs to go a step further and also provide guidance for companies on the AIM market. Sector-wide initiatives should also be welcomed to attract and develop female talent in erstwhile ‘macho’ sectors to accelerate change in terms of gender diversity.

With new research by McKinsey claiming tackling gender equality could add $12tn to the world economy (equivalent to the GDP of Japan, Germany and the UK combined); the issue of women on boards is both a social issue and one which has the capability to improve the financial performance of companies. And promises of improved profitability should be enough to whet the diversity appetite of boards which have yet to tackle the issue.