04 Lug Progressing diversity
When it published its first report in 2016 the Hampton-Alexander diversity review set ambitious targets. Not only was it looking towards an overall 33% female board representation rate across FTSE 350 companies, it also targeted the same rate being achieved for women on FTSE 350 executive committees and direct reports to executive committees; both by the end of 2020.
In highlighting direct reports in this way the review’s authors recognised the vital role which the executive pipeline plays in ensuring a continuity of diversity at the top echelons of companies. It is one thing to look towards diversity in recruitment; but unless diversity is also embedded across the organisation, the opportunity to progress can become vanishingly small, in the process potentially hampering organisational success. As a McKinsey report from 2018  revealed “Companies in the top-quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation.” No wonder Business Minister Kelly Tolhurst recently commented: “Diversity makes good business sense and those who fail to see this as a priority are missing out on the benefits that diverse leadership brings.”
Are companies going to be able to meet these ambitious targets? In June 2019 an analysis of FTSE 350 board positions as at November 2018 was published. This revealed that in terms of female representation the FTSE 100 stands at 32.1% whilst the FTSE 250 is at 27.5%, with the FTSE 350 at 29.1%. Of particular note is the statistic that across the FTSE 350 there are only four companies with all-male boards.
Whilst that represents good progress, in March of this year sixty nine companies in the FTSE 350 were identified as only having one woman on their board. In a joint initiative by the Investment Association and the Hampton-Alexander review, all sixty-nine were approached with a view to improving representation. More than half of the companies responded with a clear intent to meet the 2020 target and twenty have already increased their female board representation levels. Just fourteen companies have failed to respond.
Commenting on the progress seen so far Chris Cummings, Chief Executive of the Investment Association said: “Investors want to invest in businesses that demonstrate they are diverse and inclusive because this leads to better decision-making and avoids group think” adding “there has been good progress made” but “there is still more work to do.”