Gender Diversity: A Step-Change Is Needed
UK business is in danger of stalling on an uphill climb when it comes to the progression of women. Yes, there has been progress in the number of women to be found in boardrooms since targets were first set in 2011. It is progress achieved via investor pressure, closer scrutiny of the appointment process, a great deal of diversity evangelism and the use of public shaming via the media. It is also now painfully apparent that this was always a demand, and not a supply problem.
Now, according to the latest report on the state of play on gender progression from the government-backed Hampton-Alexander review, “a step change is needed for senior leadership roles below board level: 50% of all appointments next year need to go to women, or the 2020 target will not be met.”
The update shows that the targets that were first set in 2011 have paid off – the FTSE 100 is on track to reach a 33% target for women on boards ahead of the 2020 deadline, and it’s possibly the FTSE 250 will get there too, with effort. Some 39 businesses now have a lone ‘token’ woman on their board (down from 74), but there are still two All-Male boards – Daejan Holdings plc and Kainos Group plc, which joined the FTSE 250 in June 2019.
But around 175 companies are still “well adrift” from the 33% target. There remain 44 All-Male executive committees. Of greatest concern, perhaps, is this observation from the report: “Not all companies are making the same efforts, and the gap between those working hard to improve gender balance and those doing little, is each year more obvious.”
It is of concern because corporate governance is the essence of a business – and diversity, which includes gender diversity, is widely recognised as a cornerstone of better corporate governance. “Investors have been consistent in their demands for greater diversity. It’s not just a nice to have. The research is clear: firms with diverse boards and management teams make better decisions, drive innovation and outperform their less diverse peers” said Chris Cummings, Chief Executive of the Investment Association at the launch of the report.
In my independent blog Board Talk recently, I explored some ways that have been suggested of moving the needle on gender diversity, and why broader diversity matters.
Gender Equality
The identification of a need for this ‘step-change’ is also of concern in what it suggests about the UK’s attitude to gender equality.
“There are over 900 women now serving on FTSE 350 boards, providing an ever-increasing pool of women with substantial board experience. Yet only 25 women have been appointed into the Chair role, even fewer as women CEOs with no sign of change… a stronger focus is now required at every stage of the appointment process to address the reasons why top jobs aren’t going to women” said Denise Wilson, Chief Executive of the Review.
On Board Talk in February 2019 I wrote: “In the FTSE 350 today, there are 137 companies with a chair that has served on the board for more than eight years and 110 that are non-compliant with the Code. The overwhelming number of chairs with eight or more years of service on the board are male (97.81%) and there are 22 female board chairs (6.29%) - of which one has served for more than nine years and three have served for more than eight years. Clearly, new blood is needed in the role of Chair in the FTSE350.” The post was titled FTSE350: A Golden Opportunity To Focus On Gender Diversity And The Role Of Chair.
Stay tuned for further updates.
The Hampton Alexander Review landed within 24 hours of other news grabbing attention – a new editor for the Financial Times.
Roula Khalaf is to succeed Lionel Barber in a role that does not often come up. Born and raised in Beirut, Lebanon, she will be the first woman to be editor at the FT since the paper was founded in 1888. This marks an important moment in the UK well beyond the walls of the FT. But at one of Britain’s best business media brands – which has been bursting with talent across gender for at least 40 years – it has taken 131 years for the powerful role of ‘Editor’ to become a gender-neutral term.
A commitment to gender equality is critical for the progress of business and of society. If corporate governance is the essence of a business, gender inequality if present in the system may point towards a more fundamental systemic inequality that cannot bode well in 2019 for any sustainable business. We talk about the “gender pay gap” in Britain often now, but we skirt around the fundamental issue of inequality, just as we do about race.
Inequality: Dividends v Wages
The news keeps coming on issues which raise critical questions on our business models of choice.
Analysis published today by the TUC and the High Pay Centre reveals that returns to FTSE 100 shareholders rose by 56% between 2014 and 2018, while wages increased by 8.8%.
“Over that period, the UK’s largest listed companies generated £551 bn in profit and returned £442 bn to shareholders in dividends and buybacks – equivalent to £1.7 bn a week. The analysis shows that FTSE 100 shareholders received £123 bn in share dividends and share buybacks in 2018, compared to £79bn in 2014. This amounts to a 56% nominal increase in returns to shareholders, while nominal median wages for UK workers increased by just 8.8% over the five years” it says.
“If pay across the UK economy had kept pace with shareholder returns, the average worker would now be over £9,500 better off” suggest the TUC and the High Pay Centre.
“We won’t raise living standards in the UK without a change of business rules. Boards remain too focused on generating short-term returns for wealthy investors, but are not doing enough to address their responsibilities to their workers, the environment and wider society” said Luke Hildyard, High Pay Centre Executive Director.
You might have noticed that we are in the middle of a general election. These are some of the issues that should be at the forefront of discussion. There are many who will dismiss the comparison between shareholder returns and worker’s wages. But it would be interesting, I think, to see what happens when you put a gender lens on the analysis.
Investors, Hypocrisy, Corporate Governance
Out of time and space, so just a quick mention here of this piece in the FT on Tim Martin, founder of Wetherspoon plc, who has accused investors of hypocrisy on corporate governance. If you keep an open mind but stick to your values, it’s often surprising who you end up agreeing with on some things - to be explored further in Board Talk.
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