More Than Half of FTSE 350 Board Seats Filled by Women

Just 22% seats filled by ethnic minority individuals; 55% of companies have no non-white directors.

In a year of record appointment volumes, 54% of seats on FTSE 350 company boards were filled by women in 2021, the largest share to date.

But firms still have a way to go on diversity, according to Heidrick & Struggles’ Board Monitor UK 2022 report, which analysed the 442 appointments made in 2021, up from 362 in 2020.

The executive search firm’s analysis, which examined board diversity at FTSE 350 companies, found just 54% of companies had met the Financial Conduct Authority’s (FCA) mandate requiring companies must have at least one woman in one of the following roles: chair, senior independent director, CEO, or CFO.

Annual reports detailing whether companies had successfully appointed at least one person of non-white ethnicity to a board position, also an FCA expectation, are due to be published in the next cycle. The Heidrick & Struggles’ report found that while racial diversity at companies had improved, just 22% of vacant seats went to individuals of Asian, Black or African descent last year.

Up to 78% of seats were still filled by white individuals, while just 17% were filled by Asian individuals, and 5% were filled by Black or African individuals.

Currently, the overall gender balance on FTSE 350 boards (36%) is still shy of the FCA’s required 40%, and 55% of FTSE 350 companies still had no non-white directors on their board.

High on the agenda

Diversity, equity and inclusion (DE&I) has been rising up investor agendas, with investors collectively and individually encouraging firms to increase representation at senior levels, alongside government initiatives.

In February last year, the UK Investment Association (IA) said it would sanction FTSE 350 companies failing to disclose board-level ethnic diversity or failing to publish a “credible action plan” to meet Parker Review targets.

In March 2022, the association flagged that diversity would be “top of mind” for investors during the coming AGM season, following issuance of new expectations of companies provided by the body. The IA’s Institutional Voting Information Service (IVIS) will analyse the issues this AGM season.

The Parker Review set out a requirement for FTSE 350 firms to have at least one director from an ethnic minority background by 2021.

Last summer, a joint report from the Chartered Governance Institute UK and Ireland (CGI) and consultancy Centre for Synchronous Leadership (CSL), found that top recruitment processes at UK firms were “distorted” and pointed to an “attachment to power,” that was influencing selection, adding that diverse candidates excluded based on flawed processes and criteria.

More recently, the investor group of the 30% Club sent a letter to FTSE 100 firms failing to meet the requirements of the Parker Review. Together they represent asset owners and managers worth almost £12 trillion.

It detailed intentions to engage with board chairs, nomination committees and executive teams on inequality within leadership positions.

The Hampton-Alexander Committee, the body which sets expectation on gender diversity at board level across UK-listed firms, revealed last year that the number of women on FTSE 250 boards had grown by 50% over the last five years.

The committee set new expectations earlier this year, including for both FTSE 350 boards and leadership teams to have a minimum of 40% women by the end of 2025. It also reported “steady progress” in 2021, with the number of women in the combined executive committee and direct reports at FTSE 100 firms increasing to 32.5%, while FTSE 250 firms reported slightly lower levels.

Voting power

At the beginning of 2022, major asset managers including BlackRock and State Street said they would automatically vote against boards lacking specified levels of diversity.

Legal & General Investment Management (LGIM) revealed last month in its latest Active Ownership report that it had opposed the election of 370 directors globally over concerns regarding board diversity last year.

BlackRock’s 2022 voting policy set out a 30% target on board diversity, with the asset manager encouraging companies to have at least two directors who identify as female and one who identifies as being from an underrepresented group.

According to Heidrick & Struggles, a combination of factors had contributed to the uptick in new board appointments, including the nine-year rule it said was likely to have been responsible for the 27 new chairs appointed across FTSE 350 boards last year.

It also noted that there were just two new chair appointments at Fortune 500 companies during the same period.

Supporting measures

Dimple Mistry, spokesperson for the Race & Ethnicity Workstream, The Diversity Project, said target-setting needed to be accompanied by other measures for firms to create diverse boards.

“It is necessary to ensure that board members are in a safe environment to speak up and for the culture to be inclusive of their views. Ethnically diverse and inclusive boards will ensure robust conversations are had, and that different viewpoints are considered when decisions need to be made or input needs to be gathered. A wider and varied collective experience is only a good thing,” she said.

Further, Mistry recommended further efforts to improve ethnicity disclosure rates at all company levels, in parallel with efforts to ensure boards reflect stakeholders and the workforce.

“Organisations should also work toward adding ethnicity pay gap reporting in addition to gender pay gap reporting. Whilst voluntary, in our minds, these measures are necessary if organisations are committed to closing the experience, pay and promotion gap of ethnically diverse staff”.


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