The number of women on boards in the UK has increased from 12% in 2011 to 26% this year. The UK however still lags countries like Norway, Sweden and France in terms of female representation at the top, but far outperforms the US, Ireland and China. Top performing companies include Unilever, Kingfisher and HSBC Group, with Capita the only professional services firm in the top 40.
Diversity at board level has in recent years been spotlighted in many developed countries as an issue. While historically the issue has been framed as an equality or diversity debate, recent studies have shown that besides ethical considerations, money too is at stake. Recently released reports show that lack of female leaders at board level could be costing top companies in the US, UK and India up to $655 billion, the global economy up to $12 trillion, while a BCG report highlights that diversity in general across companies improves business performance. Diversity according to these, and many more, recent studies too fits a business case.
In a recent five year review for the British Government, titled ‘Improving the Gender Balance on British Boards’, Lord Davies supported by Women on Board, KPMG and Cranfield University explores the effect of a concerted effort to increase the number of women on FTSE 100 and FTSE 250 boards within the UK started in 2010.
Women on board
The message has in recent years been heard by the business community – women on board numbers have been steadily increasing on a sustained effort through multiple channels to end the phenomenon of male dominance at the top of business. Since 2011 the number of women on boards at FTSE 100 companies has increased from 12.5% to 26.1%, The increase has been partly attributed to a small group of senior, highly respected Chairmen, who took up the challenge early on and called their peer group to action.
While the number of women on board level has increased considerably in the UK, there remain a number of areas of concern regarding diversity within companies. Particularly statistics surrounding women active at the level of executive director remains low, increasing only 4.1% since 2011 to 9.6%.
The report highlights that the UK has done relatively well in recent years compared to other developed economies, coming in 6th place. Norway is the runaway winner with 35% of board spots held by women, followed by Sweden and France at 33% and 32% respectively, as well as Finland at 30% and Belgium at 29%. The Netherlands comes in at number seven with 24%, while Germany takes the number nine spot with 21%.
The worst performers are emerging economies China and India, with 11% and 12% respectively. Interestingly, Ireland is not much further, with 13% of board members female. The US too scores considerably below the efforts of the UK, with 17% of females on boards in 2015.
The Top 40
In terms of top performing boards, Intercontinental Hotels Group and Unilever come in at number 1, both increasing the number of women on their boards to 6. Kingfisher and Next come in joint third place, with 44% representation. HSBC comes in at number 5, with 8 of the bank’s 19 board members female. Capita is the only professional services firm on the list, with 22% of its board female in 2011 rising to 40% today.
As part of the analysis a projection was developed into the future of board representation. The Cranfield School of Management developed a set of trajectories for FTSE 100 and FTSE 250 over the next 5 years. These trajectories are based on a number of assumptions:
1. That the number of board seats remains constant;
2. That turnover remains constant at 15% for FTSE 100 and 14% for FTSE 250;
3. That 33% or 25% of new seats will go to women (higher and lower ranges);
4. That the male / female split coming off boards mirrors the male / female split six years prior, given average tenure is six years;
5. The turnover rates assumed in the trajectories are based on the four year actual average turnover rate of 15% in the FTSE 100 and the three year actual average turnover rate in the FTSE 250 of 14%.
The resulting projections shows that for FTSE 100 companies, the average representation climbs to 40% with a 33% appointment rate, compared to 34% at a 25% rate. For FTSE 250 companies representation jumps to 36% on a 33% rate, compared to 30% for the 25% rate.
According to the historical trend, the 33% appointment rate to reach 25% in 2015 was closely followed by FTSE 100 companies, running at an average 31%, while FTSE 250 companies managed a 29% rate. As more and more Executive Search companies take on the challenge and demand coming from boards, the authors hope that the upper end of the projection range will be achieved in line with the recent trend.
Melanie Richards, Vice Chairman, KPMG in the UK, remarks that: “there can be no doubt that Britain’s boards have undergone a significant shift over the last five years and the FTSE 100 is to be congratulated for boosting the number of women in its boardrooms to more than 25 percent, with the FTSE 250 having made great progress too. This achievement is just the first step in an important journey and there remains substantial work to be done."