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Women on boards: the final Hampton-Alexander report is a major milestone, but there is still a long way to go

Posted on 9 March 2021

The Hampton-Alexander Review has published its fifth and final report on improving gender balance in FTSE leadership. The Government-backed review, which was launched in 2016, has achieved its target of 33% women on the boards of FTSE 350 companies on average by the end of 2020. While this is a major milestone and cause for celebration, the 33% target was not met for senior leadership positions (executive committees and their direct reports). There is therefore still a long way to go to improve women's representation at the top of our leading companies.

A decade of progress

The Hampton-Alexander Review built on the work of the Davies Review, which was introduced in 2010 to examine underrepresentation of women on boards. At the time, women made up just 9.5% of boards in the FTSE 350. In 2015, the Davies Review met its target of 25% women on the boards of FTSE 100 companies. The final report is therefore the culmination of 10 years of placing board diversity in the spotlight, and a great example of voluntary, business-led data transparency in action.

Key findings from the final report:

  • Women representation on FTSE 350 boards has risen from 21.9% in 2015 to 34.9%.
  • There are no longer any all-male boards in the FTSE 350.
  • The number of boards with only one woman has fallen from 116 in 2015 to 16.
  • However, in the FTSE 100, women only hold 14% of executive directorships and there are only 8 female CEOs.

Still a long way to go

Despite hitting the target calculated by an average, there are many companies who did not meet the 33% target. If we drill down into the data, 37% of FTSE 350 companies have not achieved the 33% target for women on boards, and around 70% have not achieved the 33% target for leadership positions. The appointment rate of women (another key indicator of progress) still lags behind men, with 60% of all roles going to men.

The number of women in executive director roles also remains stubbornly low in the FTSE 350, with only 8% of women on boards acting as executive directors, versus 92% in non-executive director roles. As executive positions tend to carry far higher pay than non-executive directors, this contributes to substantial gender pay gaps in these companies. For more information on gender pay gap reporting, please see our recent article.

Less attention has been on companies below the FTSE 350, where the picture on board diversity is bleak. In the AIM UK 50, according to a report in January 2020, only 15% of directors were women and 36% had all-male boards. Even worse, 42% of these companies had no mention of or policy on diversity. The latest report should therefore not be cause for complacency, as there is still some distance to achieving equality.

Investors are calling for increased diversity

Despite the review coming to a close without the establishment of a successor review, it is encouraging that the investment community has taken steps to embed the progress of recent years, using the voting rights of investors. For example, in January 2020, the Investment Association listed diversity as one of four areas identified by investors as critical drivers of long-term value for companies. In their voting intentions for 2021, the Investment Association plan to "red top" companies that have female representation of 30% or less on boards and 25% or less in their executive committee and its direct reports. "Red top" means that they are recommending a vote against the corporate governance report of these companies at their AGMs (annual general meetings).

It appears that the review has been more than just a target, but now represents a key business topic and has contributed to a wider cultural shift for stakeholders and the community. Diversity on boards is now a base expectation, and it is recognised there is a strong business case for balanced boards.

Recommendations for the future

Sir Philip Hampton (the co-leader of the review) believes that any successor initiative should focus strongly on the executive level, and sets out the following recommendations in the review.

  1. Companies should have at least one woman in the four roles of Chair, CEO, SID, and CFO, and investors should support this best practice.
  2. The Department for Business, Energy and Industrial Strategy (BEIS) and Government Equalities Office (GEO) should coordinate the initiatives the Government backs on diversity in business.
  3. Companies should publish a gender pay gap for their board and executive committee (to shine a light on the structural subordination of women).
  4. BEIS and GEO should review with investor groups annually voting sanctions applied to listed companies failing to meet their gender targets.

While the Hampton-Alexander review focused on gender, this is not the only pressing diversity issue on boards. The Parker review, launched in 2017, set targets of at least one director of colour on FTSE 100 boards by 2021, and by 2024 on FTSE 350 boards. This time last year, according to the following article, just over half of FTSE 100 boards had met this target and it remains to be seen whether the milestone on ethnic diversity will be achieved.

Stakeholders are increasingly appreciating that driving diversity in leadership is not a goal in itself, but improves the all-round performance of business. Post-pandemic (when inequalities have been exposed more than ever), it is hoped that mounting stakeholder attention from investors, consumers and employees will continue to fuel progress for the careers of those who are otherwise under-employed, including women in executive leadership positions.

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