In our response last week to the BEIS Green Paper on Corporate Governance Reform, we ask Government to avail themselves of all opportunities, including the current Corporate Governance Reform, to reinforce the need to appoint more women onto FTSE Boards and into leadership positions and draw attention to the key Recommendations of the Review. The response draws on the widely accepted business case that increased gender diversity at board level and in leadership ranks, strengthens the existing governance framework, a company’s performance in the round and enhances employee, customer and public trust in business.
See the full letter from Sir Philip Hampton and Dame Helen Alexander below
We write in response to the Corporate Governance Reform Green Paper which was issued by the Department for Business, Energy and Industrial Strategy (BEIS) on the 29th November 2016.
We are pleased to see the work of the Hampton-Alexander Review specifically mentioned alongside that of Sir John Parker, as playing a pivotal role in helping address many of the Corporate Governance challenges currently facing British business.
Our comments respond to the Green Paper in its broadest sense, based on the business case and now widely accepted rationale that increased gender diversity at board level and in leadership ranks, strengthens the existing governance framework, a company’s performance in the round and enhances employee, customer and public trust in business.
We also draw attention to the progress achieved under the independent Hampton-Alexander Review (the Review) and its predecessor, the Davies Review (2011 to 2015). The Review, with an extended scope and voluntary target of 33%, is aimed at addressing the under-representation of women in approximately 7800 of the most senior leadership positions in the FTSE 100, at the same time as encouraging further increases on FTSE 350 Boards.
Following two decades of near zero progress, with the launch of the Davies Review in 2011 and support from business partners and Government, FTSE 350 Boards have increased the representation of women from 9.5% to over 23% today. The number of All-Male Boards has reduced from 152 to only 8 (January 2017) in that time and over 550 new women have been appointed to FTSE 350 Boards.
Furthermore, the positive impact women are having at the top table is selling itself, with more and more businesses recognising the benefits of diverse teams and inputs. We refer you to the attached Hampton-Alexander Report (November 2016) for further details, including the many FTSE Chair and CEO testimonials describing the impact and value of increased gender diversity on Boards and in leadership ranks to their business. https://ftsewomenleaders.com/
However, with less than a third of FTSE 350 Board appointments currently going to women and many FTSE companies making very slow progress, there is still a long way to go to achieve gender balance at the top of British business. In November the Review mapped out the next milestone on the journey for FTSE Listed companies, including a set of voluntary targets to be achieved by the end of 2020. These are as follows:
- FTSE 350 Boards to increase women’s representation to 33%
- FTSE 100 Executive Committees and Direct Reports combined to increase women’s representation to 33%
- FTSE 350 to increase the number of women appointed to Chair, Senior Independent Director and Executive Director roles
- FTSE 350 companies to publish voluntarily the gender balance at Executive Committee and Direct Reports levels
- All FTSE companies to take prompt action to address any shortfall with gender balanced boards the new norm.
Many FTSE companies are working hard to appoint women both onto their Boards and into senior leadership positions. A significant number are making very slow progress. Around 180 companies in the FTSE 350 still have fewer than 25% women on their Boards and there remain 8 (January 2017) All-Male Boards. Recent voluntary disclosures below the Board have revealed 12 All-Male Executive Committees in the FTSE 100 alone.
Albeit the Review is independent and business led, it is also supported by Government. The visible support of the Cabinet, including the Prime Minister, the Secretary of State for BEIS, the Secretary of State for Education and Minister for Women and Equalities, respective Under- Ministers and the FRC, have all been vital to the progress achieved since 2011. Senior Ministerial support is essential to keeping gender balance high on the FTSE business agenda.
We ask Government to avail themselves of all opportunities, including the current Corporate Governance Reform, to reinforce the need to appoint more women onto FTSE Boards and into leadership positions and draw attention to the key Recommendations of the Review.
The gender split on FTSE Boards is a matter of public record. Currently there is no or ill-defined disclosure requirement for leadership positions below the Board.
We also encourage Government to act in line with Recommendation 3 of the Hampton- Alexander Report in amending the UK Corporate Governance Code to require all FTSE listed companies to disclose annually the gender balance for Executive Committee members and their Direct Reports.
In the absence of complete and transparent disclosures, it is difficult to track progress, poor practice goes undetected and appetite and actions to address the shortfall in women leaders are less likely to be in place. Furthermore, key supporting stakeholders who play a lead role in encouraging change, such as Investors and Executive Search firms, are hindered through lack of visibility on poor performers and where they can most effectively engage and target efforts.
It is not a fundamental shift that is required to the corporate governance framework governing listed companies in the UK, but a fundamental shift in the profile of British business leaders.
Diverse inputs lead to more robust challenge and decision making, curbing excess, group-think and unnecessary risk taking. Gender balanced teams improve innovation, have a ‘modernising’ effect that increases employee and consumer confidence and make companies more grounded in society and the democratic process.
Companies that have effected significant change in the make-up of their board and leadership profile have naturally introduced an effective set of checks and balances, better equipping them for the business and economic challenges ahead.
Sir Philip Hampton & Dame Helen Alexander