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FTSE 350 boards hit gender diversity goals, but executive pipeline looks weak

By Jessica Tasman-Jones

This article is brought to you by Agenda, an FT Specialist publication that focuses on corporate boards

Water company Severn Trent is set to become the first FTSE 100 company to have an all-women line up in its top leadership when Helen Miles becomes chief financial officer designate next month. Christine Hodgson has been chair since April 2020, while Liv Garfield has been chief executive officer for almost a decade.

Severn Trent is one of only seven FTSE 100 companies with more women than men on its board. A further eight FTSE 100 companies have achieved gender parity at board level.

The UK’s largest listed companies have made great progress on gender diversity on boards. Last month, the FTSE Women Leaders Review revealed its target of achieving 40 per cent female directors in the FTSE 350 by 2025 had been reached three years early.

Women hold 40.2 per cent of board roles in FTSE 350 companies – up from just 9.5 per cent in 2011, according to the report. The UK – which uses voluntary targets – is ranked second globally, only behind France where there are mandated quotas.

But there is still work to be done. In the FTSE 100, a fifth of chairs (19 per cent) and 37 per cent of senior independent directors (SIDs) are female, the report finds.

Progress is slower in executive roles too. There are only nine female chief executives leading FTSE 100 companies and 21 leading FTSE 350 companies. Overall, 33.5 per cent of FTSE 350 leadership teams, which includes the executive committee and their direct reports, are female, according to the review.

The FTSE Women Leaders Review has voluntary targets in these areas. By the end of 2025, they want at least 40 per cent of leadership teams in the FTSE 350 to be female and for there to be at least one female in the role of chair or SID, and/or a woman as chief executive officer or finance director.

The UK is a positive outlier in terms of the effectiveness of its soft mandates, says Audrey Kaplan, lead portfolio manager at asset manager Robeco. An OECD report published last year said mandates are more likely to be reached than recommendations.

And the UK is no better at getting women into the senior executive and management positions – where they can make the most performance contributions – than countries with hard mandates, she adds.

Scrutiny of gender diversity has been critical to UK boards meeting targets, says Mary Walsh, a communications advisor to the FTSE Women Leaders Review.

Such oversight will be increasing in the UK as boards with reporting periods after April 2022 will need to meet Financial Conduct Authority rules requiring disclosure about diversity metrics in annual reports. Companies must "comply or explain” if their boards lack 40 per cent women directors, one ethnic minority board member and a woman in either the chair, SID, chief executive or chief finance officer role.

Listed companies must also include a “numerical table on the diversity of their board and executive management by gender and ethnicity.”

The FCA rules have implications for compliance, reputation, ESG and companies’ ability to attract funding so boards should be involved in discussions about disclosure, says Gavin Haran, head of policy for asset management at Macfarlanes.

Proxy adviser ISS says it will consider recommending shareholders vote against the chair of the nomination committee or another relevant director if companies do not meet the voluntary targets set out by the FCA.

Women employees drop off as you get closer to c-suite roles, says Kaplan. Robeco would welcome transparency about female representation at each level of the company and a commitment for the gender proportion at every level to match the one below, she says.

Mentoring, flexible work, paid parental leave, diverse recruitment processes, diversity and inclusion training and holding managers accountable through key performance indicators are all examples of policies companies might consider to achieve that, she notes.

Vodafone's general counsel and company secretary Maaike De Bie says the group did not set a target for diversity on its board, although it used inclusive recruitment practices. The company has, however, set a goal of 40 per cent gender diversity in leadership and management roles by 2030 and 25 per cent ethnic diversity for its senior leadership team, says De Bie. Those figures were 33 per cent and 18 per cent at the end of the last financial year.

Diageo aims for its leadership to be 50 per cent women and 45 per cent from ethnically diverse backgrounds by the end of this decade, according to a spokesperson from the company. It tries to make its female non-executive directors visible to its workforce and diversity metrics are included in its long-term incentive plans, they added.

The proportion of women on boards could be at a tipping point to drive change in the executive, says Vimmi Singh, a leadership coach and experienced director.

"If I am the only woman or minority on a board, I have a seat but not necessarily enough support to push for change,” she says. “... You need some critical mass and so success with this 40 per cent representation of women on boards sounds promising.”

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