FTSE gender balance a year on – is progress being made?
November 17, 2017
Hampton-Alexander Review’s supplementary report suggests a ‘step change is needed in pace’ to meet gender balance targets in FTSE leadership by 2020.
The Hampton-Alexander Review (the “Review”), an independent, business led review supported by the UK Government, has published its ‘one year on’ supplementary report on gender balance in FTSE leadership.
In 2016, the review set a series of recommendations aimed at increasing the number of women in leadership positions of FTSE 350 companies. The recommendations included, amongst others, that:
- FTSE 350 companies should aim for a minimum of 33% women’s representation on their boards by 2020.
- FTSE 100 and FTSE 250 companies should aim for a minimum of 33% women’s representation across their leadership teams (meaning those who either sit on a company’s executive committee or directly report to members of that committee) by 2020.1
According to the supplementary report, women’s representation on the boards of FTSE 100 companies stands at 27.7%, compared with 26.6% last year. With just less than a third of FTSE 350 leadership roles going to women in the year, almost one in two or around 40% of all appointments will need to go to women over the next three years to achieve the 33% target.2
Transparency was, however, much improved with all FTSE 100 companies and all but ten FTSE 250 companies (excluding investment trusts with no eligible employees to declare) voluntarily submitting data. The result is, for the first time, a near-complete set of data on gender balance in FTSE 350 leadership.
Current Reporting Requirements for Listed Companies and Further Recommendations by the Review
The UK Corporate Governance Code (the “Code”), which applies to companies with a premium listing, currently includes recommendations on diversity in board composition. For example, the Code states that “a separate section of the annual report should describe the work of the nomination committee, including the process it has used in relation to board appointments” and that such section “should include a description of the board’s policy on diversity, including gender…”3. The Code further notes that “evaluation of the board should consider the balance of skills, experience, independence and knowledge of the company on the board, its diversity, including gender…”4.
In their 2016 recommendations, the Review suggested that the Code should, however, be amended so that all FTSE 350 listed companies disclose in their Annual Report and Accounts the gender balance of their leadership teams. The FRC announced at the start of the year that they will undertake a fundamental review of the Code, but it is not clear whether this review will include proposals on further diversity provisions in the Code.
Current legislation also requires listed companies to disclose within their strategic report the gender balance amongst directors, senior managers and employees.5 The Review considers that the current definition of “senior managers” does not easily lend itself to making clear comparisons between companies in order to assess progress on gender diversity. The Review suggests that the Government should, in consultation with businesses, consider how best to clarify or supplement the definition of “senior managers” to achieve a more consistent metric. This should be based on the executive committee or its nearest equivalent in each company, and direct reports to members of that committee.
Conclusion
Whilst in certain areas progress is being made (and it is helpful that we now have, for the first time, a near-complete set of data on gender balance in FTSE 350 leadership), it is clear there is much to be done.
The Review is a timely reminder of the need for companies to continue to address diversity in their leadership. The extent to which diversity has been achieved and the steps being taken to address the issue may well also form part of the narrative which companies will want to issue to accompany the publication of their gender pay gap statistics which is required for the first time for employers with 250 or more employees by no later than April 2018.
Footnotes
1) The recommendations were amended to in October 2017 to include the FTSE 250.
2) Hampton-Alexander Review, November 2017.
3) Provision B.2.4 of the UK Corporate Governance Code.
4) Supporting Principle B.6 of the UK Corporate Governance Code.
5) Section 4, Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
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