Diversity improving on FTSE 350 boards but pipeline concerns remain

Out-Law News | 25 Feb 2020 | 5:24 pm | 2 min. read

The vast majority of FTSE 350 company secretaries now believe their boards are gender diverse – but ethnic diversity and the pipeline of new boardroom candidates remains a concern.

While 84% of the FTSE 350 now think their boards are gender diverse, only 29% believe their boards are ethnically diverse.

Data from the winter 2019 edition of the FT-ICSA Boardroom Bellwether Survey, carried out by the Financial Times and the Chartered Governance Institute (ICSA), showed that only 3% of FTSE 350 company secretaries said their boards were not gender diverse. However, 55% of respondents said their boards were still not ethnically diverse, up from 52% at the time of the last survey six months ago.

Diversity and inclusion expert Stuart Affleck of Brook Graham, which is owned by Pinsent Masons, the law firm behind Out-Law, said: "It is encouraging to see improvement in female representation on boards, however there is still a lot of work to do".

Stuart Affleck

Stuart Affleck

Director, Brook Graham

Committed organisations are looking across the entire talent pipeline and asking broader questions to understand how their people experience the organisational culture to then build a culture which is inclusive by design, rather than being left to chance.

"Female representation in the chair position continues to remain low across the FTSE 100 and 350 and ethnic diversity amongst boards is declining," he said.

"Committed organisations are looking across the entire talent pipeline and asking broader questions to understand how their people experience the organisational culture to then build a culture which is inclusive by design, rather than being left to chance. Mitigating unconscious bias through live bias reviews is just one way to help committees and senior leaders create diverse teams. Diversity and inclusion should be treated like any other valuable asset in order to achieve sustainable change for the future," he said.

The survey also tracked the diversity of boards in terms of geographical spread and their business experience. More respondents thought their boards were diverse in this way than they did six months ago.

Despite this, a significant number of company secretaries are concerned about the pipeline of potential candidates to join the board. Over a third (39%) said the executive pipeline for the board was insufficient, with an additional 18% unsure, a threefold increase on a year ago when just 6% were unsure. 

Companies saying they were trying to improve their pipeline were showing “genuine commitment” to doing so, according to the survey, with board tenure taken into consideration and greater investment in executive succession planning in a variety of ways.

Connected to this, more companies are focusing on corporate culture. Almost all boards had discussed issues relating to corporate culture in the last year, with 96% of survey respondents having discussed it at least once and 47% having discussed culture at least two or three times.

Remuneration is another key topic, particularly when it comes to issues such as the gender pay gap. ICSA said 68% of the FTSE 350 were now considering the gender pay gap when making decisions about executive pay – up from 37% in summer 2018. Meanwhile almost three-quarters of respondents were thinking about the pay ratio between the chief executive and the average employee, up from 46% 18 months previously.

The impact of the government’s gender pay gap reporting requirements could also be seen in responses, with 31% of respondents saying they had made changes to policies and strategies as a result of gender pay gap reporting.

However, despite 65% of respondents taking action to reduce the gender pay gap, only 34% have so far published an action plan.