Representation in FTSE 100 boards improves steadily

01 May 2020 Consultancy.uk

The number of women appointed in the boardrooms of large European companies continues to gradually rise, according to a new report from Korn Ferry. The study suggested that the UK is making progress in line with this, as companies seek to meet the 33% female board targets recommended by the Hampton-Alexander Review.

The 2016 Hampton-Alexander Review stated a third of FTSE 350 board positions should be filled by women by the end of 2020. While a number of firms among the UK’s 350 largest businesses still have a way to go on the matter, it is a goal that the FTSE 100 has already met, with its female board representation breaching 33% last year.

Further illustrating the steady progress on this front, consulting firm Korn Ferry has now examined the composition and pay structures of 393 listed companies across 13 European countries, with its ‘Directors in Europe’ report. The detailed picture of the state of the boardroom across the continent took in data from companies listed on the FTSE100 in the UK, DAX100 in Germany and the CAC40 in France, among others.

Gender mix in European Boardrooms

Consistent with the previous findings, Korn Ferry has found that the UK’s companies have around 35% female representation in the board room – consistent with the average number for the continent as a whole. Overall, European board rooms saw a modest 2% increase on female representation over the last 12 months, and while the UK sits distinctly in the middle of the pack, it was significantly better than Austria, where just 20% of director positions are occupied by women.

However, this may be about to rapidly change, and the UK should be wary that it does not get left behind in the race to realise gender equality in business. Austria has adopted quotas to force companies to boost the number of women on boards – a tactic which has already been successfully deployed by France. As binding legislation has forced the hand of many companies in France, its share of female directors on boards stands at 45%, and Austria’s new threshold could soon see it make ground on the UK in that case.

Michael Bursee, a Senior Partner at Korn Ferry in Germany, remarked, “Since 2018, there is a quota for listed companies with more than 1,000 employees, set at 30% women on board positions. This must be considered in any new elections or delegations, and if companies are unable to appoint women to at least the 30% threshold, then they are required to leave those seats vacant until a suitable candidate fills the position.”

Median actual pay by country

However, Rob Burdett, Senior Client Partner at Korn Ferry, asserted that the UK was on the right track, even without binding legislation. Pointing to the Hampton-Alexander Review, he noted that a series of recommendations aimed at increasing the number of women in leadership positions in the 350 largest UK listed companies seemed to be working. 

“Namely,” Burdett expanded, “that there should be 33% women on FTSE 350 boards and 33% women in FTSE 100 leadership teams- by 2020 (with leadership teams' defined as members of the Executive Committee and those senior leaders who are direct reports to Executive Committee). This year, 35% of the average board is female within the sample.”

State intervention does seem to have helped other countries address another issue related to gender parity in the workplace, though: the infamous pay gap. According to Korn Ferry’s findings, France leaves the rest of Europe in the dust with regards to the median pay gap of its board rooms. On average, male non-executive directors in Europe receive a median 5% more in total fees than their female counterparts. While this is a reduction of 1% on last year, in France female directors actually received 6% more in total fees than their male colleagues.

Median gender pay gap

In terms of the UK, its lack of legislative action on the matter seems to have meant its addressing of the pay gap is delivering only minor progress. Women in Britain’s board rooms receive just under 5% less in total fees than men, so while the nation is narrowly outperforming the European median, it is well behind the likes of Austria, Spain and Norway on the matter.

Commenting on the disparity in approach between member states, Sonamara Jeffreys, Co-President of Korn Ferry EMEA said, “Some countries have set internal targets while others, unsatisfied with slow progress, have resorted to binding obligations using strict quotas to prioritise female hiring. Both approaches have had success in different countries, suggesting there’s no one way to handle this problem – it’s about identifying the stumbling blocks in each situation and being flexible in how to address them.”

Diversity

As Korn Ferry’s Sarah Chorus recently explained to Consultancy.uk, diversity does not simply end with having a higher number of women taking up senior positions in a business. Reflecting this, Korn Ferry’s study also took into account another metric, this time on the basis of nationality.

Nationality mix

In UK, this figures show that an average of 60% of non-executive directors have gained the bulk of their work experience within the UK. By contrast, 26% have gained experience from outside Europe and 14% from within Europe. When looking at directors' nationality, an average of 51% are British, 23% are from other European countries and 26% are non-Europeans. According to Burdett, this is another area where the UK should be able to get by via government nudging, rather than formal legislation.

He explained, “While women on boards remain in focus, the Parker Committee urges business leaders to improve the ethnic and cultural diversity of UK boards to better reflect their employee base and the communities they serve. The report sets out objectives and timescales to encourage greater diversity, such as increasing the ethnic diversity of UK boards by proposing each FTSE 100 board have at least one director from an ethnic minority background by 2021 and for each FTSE 250 board to do the same by 2024.

Indeed, the UK is well ahead of the median on this metric. While boards in Switzerland, Denmark, Belgium, the UK and the Netherlands are the most internationally diverse, elsewhere, 60% of directors are from the country in which they serve (down from 61% last year). Of this group, 24% are of other EU nationalities, and 16% are from outside the European Union.


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