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Investor pressure will drive increase of women in corporate leadership positions, expert says

Out-Law Analysis | 20 Nov 2017 | 12:42 pm | 3 min. read

ANALYSIS: A year after the publication of a major business-led report on gender diversity in corporate boardrooms, there has been some movement towards a 33% target for women in leadership positions at FTSE 350 companies.

However, a progress report (72-page / 2.3MB PDF) one year after publication of the Hampton-Alexander review shows that there is some way left to go. In order to reach the 33% target by 2020, around 40% of anticipated future leadership appointments will need to go to women.

Yet progress has certainly been made. Positively, all of the FTSE 100 and almost all of the FTSE 350 submitted leadership data to the review: an act which was deemed to show a "symbolic" commitment to change. Aside from the increase in transparency resulting from this data being made available by the overwhelming majority of companies, over a third of the FTSE 350 are already at 33% or more representation for women on boards, or envisage being so by 2020.

Working towards the 33% target is an area of importance to investors, as statements from industry bodies such as the Investment Association and others have indicated – and some companies already have experience of investor support being withdrawn on the basis of a lack of gender diversity. However, these are still early days, and the willingness of FTSE companies to collect data and start to look at their recruitment processes, as illustrated by the progress report, is encouraging.

Improving gender balance: the recommendations

The Hampton-Alexander review of FTSE women leaders was published in November 2016. The review, led by GlaxoSmithKline chair Sir Philip Hampton and the late Dame Helen Alexander, focused on improving gender representation at the executive level, immediately below the company board. It was commissioned by the government to develop and build on the work done by Lord Davies around improving female representation on FTSE 100 boards.

The Hampton-Alexander review recommended that FTSE 350 companies should:

  • aim for a minimum of 33% women's representation on their boards by 2020;
  • work with all stakeholders to ensure increasing numbers of women are appointed to the roles of chair, senior independent director and executive director;
  • take action to ensure that gender-balanced boards are the new norm; and
  • increase significantly the number of women in leadership positions – with a particular focus on improving the under-representation of women on the executive committee and in the layer immediately below, the direct reports to the executive committee – by, in the first instance, collecting and sharing appropriate data.

The review also recommended that FTSE 100 companies should aim for a minimum of 33% women's representation across their executive committee, and in the direct reports to the executive.

One year on: minor increases, but encouraging signs

The one year on update report demonstrates that only minor increases in representation have been made in the 2016/17 year, in both the FTSE 100 and FTSE 350. However, the standard of engagement provides encouragement that the 33% target for both women on FTSE 350 boards and women in FTSE 100 leadership teams by 2020 will be achieved.

Ten all-male executive committees are identified in the FTSE 100 as of November 2017 along with others who, at less than 20% representation, are deemed to be "in need of improvement" in comparison to a number of companies referred to as "leading by example". Representatives of BHP, Vodaphone, Virgin Media/Money, Lloyds Banking Group, Sainsbury's, BAE Systems, Sky and IHG set out how they are taking steps to ensure gender diversity at senior levels. All go further than simply challenging themselves to ensure they have more female senior leaders, with "grass roots" mentoring schemes for junior female employees, enhanced flexible working, and schemes with emphasis on attracting women and girls to STEM industries taking centre stage.

Of particular interest, the update examines different board perspectives on gender diversity. It includes comments from chairs (at Senior Plc and Rolls Royce), a company secretary (at M&S), and a non-executive director (Elementis Plc). Although each speaks to the specifics of their respective companies, there is broad agreement that:

  • the participation of women at board level encourages other talented women to aim for progression;
  • considering a wide field of applications to NED positions and ensuring women are on the shortlist is crucial;
  • it remains the case that the right person is needed for the right role; and
  • mentorship – and, in the case of Rolls Royce, board apprentice programmes – play an important part in preparing people for board roles.

In light of a more active investor community, boardroom gender diversity is an issue that requires companies to act. The update report references the '30% Club' investor group and its statement of intent, published in 2017, that "gender diversity is one element of board composition that we will continue to focus on over the coming years".

Although better data and continued focus is building a platform for results, the update's concluding message is the need to speed up the pace of change. Continued success, it says, requires "robust action from stakeholders – and every company in the FTSE 350 can play their part".

Martin Webster and Tom Garbett are corporate governance experts at Pinsent Masons, the law firm behind Out-Law.com.