The UK’s Self-Regulatory Approach

Dr. Ruth Sealy University of Utrecht

9th December 2015

Ruth.Sealy.1@city.ac.uk @RuthSealy

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Glacial Progress of women on boards

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1999 women make up 6.9% FTSE 100 board directorships

2009 women make up 12% FTSE 100 board directorships

Female Attrition

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Degrees Employed Managers Directors CEOs0

10

20

30

40

50

60

70

80

90

100

MenWomen

Just give it time…

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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Percentage of Women on FTSE 100 Boards

Supply or Demand problem?

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I’d be happy to place a woman but I can’t find one that fits…

2,000+ Invisible Women (in 2010)

From a talent pipeline of 2,281 women…

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Lord Davies Review & Report

• Main Headline: Target of 25% women on boards set for FTSE 100 companies by 2015

(Feb 2011 figure 12.8%)

Considered a stretch target as would require 33% new appointments each year to women

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The Davies Recommendations

Chairmen set targets & be accountable for the proportion of WoB CEOs monitor & increase number of women on Executive Committees Metrics should be reported for WoB, ExCo & across whole firm Financial Reporting Council (FRC) amend the UK Corporate

Governance Code to require companies to establish a policy on boardroom diversity, including measurable objectives and disclose annually their progress

Institutional Investors should play close attention to these recommendations when considering companies

Executive Search Firms should draw up a Voluntary Code of Conduct addressing best practice for gender diversity on boards

Steering Committee meet & report every 6 months Expand talent pool from where to find women Boards to publically advertise non-executive directorships

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“Women need to be more ambitious”

“Women need to be better at networking”

“Women shouldbe more assertive”

“Women should behave more like men”

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Recognition of systemic flaws…

That there are flaws in the selection and appointment processes;

Flaws in talent management systems; and

Flaws in accountability

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“Government must reserve the right to introduce more prescriptive alternatives if the recommended business-led approach does not achieve significant change.”

Lord Mervyn Davies, 2011

“…important to have as a nuclear deterrent”Business Secretary Dr Vince Cable, July 2014

The residual quota threat…

The figures 4 years on…FEMALE DIRECTORS ON FTSE 100 BOARDS

2011 2012 2013 2014 2015

Female held Directorships

135 (12.8%)

163 (15.0%)

194 (17.3%)

240 (22.8%)

286 (26.1%)

Female Executive Directorships

18 (5.5%)

20 (6.6%)

18 (5.8%)

22 (8.4%)

26 (9.6%)

Female Non-executive Directorships

117 (15.6%)

143 (18.3%)

176 (21.6%)

218 (27.9%)

260 (31.4%)

Women holding FTSE 100 board Directorships

116 141 169 205 244

Women on FTSE 100 Boards 2014No. of

All Male Boards

Date No of Boards

with Women

21 March 2011 79

11 March 2012 89

6 March 2013 94

0 June2014 100

Number of FTSE 250 all-male boards has fallen from

131 to just 15.

Executive Search Firms Code of Conduct

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Executive Search Firms should draw up a Voluntary Code of Conduct addressing best practice for gender diversity on boards

Initial group of eight firms who conducted 80% of all FTSE 100 board searches

Within three years 85+ firms signed up Competitive nature led leading firms to set up ‘Super Code’,

where recognition is ‘awarded’ by Steering Committee, based on metrics of WoB appointments

The Pace of Change

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FTSE 100 NEW BOARD APPOINTMENTS

2008 2009 2010 2012 2013 2014

New female appointments

16 23 18 47 45 53

New male appointments

133 133 117 143 88 113

Total new appointments 149 156 135 190 133 166

Female percentage new appointments

11.0% 14.7% 13.3% 24.7% 33.9% 34.0%

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Predicting percentages of WoB 2010-2020

2008 2010 2012 2014 2016 2018 2020 20220.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

12.20%12.50%14.00%15.00%

17.30%

22.80%

25.80%

27.71%

29.60%31.25%

32.77%33.92%

12.20%12.50%14.00%15.00%

17.30%

22.80%

25.80%

28.95%

32.09%

34.98%37.75%

40.15%

FTSE 100 Trajectory for Women on Boards

33% Female appoints 25% Female appoints

But it is by no means ‘sorted’…

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Across the FTSE 100 the figure may be 26.1% but…

It ranges from 50.0% to a token 9.1%

Actually only 55/100 companies have hit the 25% target

The FTSE 100 figures are the best…further down the listings the figures still languish at ~10%

EU quota aimed at ALL listed companies, >250 employees or turnover >€50m (circa 900 co.s)

Female Executive Directors

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“ We expect all Chief Executives to review the percentage of women they aim to have on their Executive Committees in 2013 and 2015. “ Davies Report 2011

Year Female Executive Committee Members

Female Executive Board Directors

2009 175 (18.1%) 17 (5.2%)2010 161 (17.2%) 18 (5.5%)2013 176 (15.3%) 18 (5.8%)20142015

160 (15.6%) 24 (8.2%)26 (9.1%)

From Female FTSE Report 2014 and Boardex data collected Oct 2015

Linking Women on Boards and ExCo

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Company On ExCo On Board

Admiral 42% 31%

Diageo 40% 44%

UU Group 39% 25%

Land Sec Gp

33% 27%

Next 33% 27%

Royal Mail 31% 36%

Capita 28% 44%

Sainsbury 27% 30%

WPP 25% 32%

Astrazeneca

25% 25%

Company

On ExCo On Board

GlencorXs 0% 0%

Fresnillo 0% 8%

Schroders 0% 9%

Shell 0% 10%

Melrose 0% 11%

Persimmon

0% 11%

Aggreko 0% 17%

Tullow Oil 0% 17%

Babcock 0% 18%

Standard Life

0% 18%

Top 10 and Bottom 10 Companies for women on ExCo

From Female FTSE Report 2013

Poor promotion to Executive Committee

Internally promoted Female

Internally promoted Male

48%

62%

+ 29%(SignificantDifference = 6.2P = .01)

From Female FTSE Report 2013

Changes in Code and Law on Diversity Reporting

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Corporate Governance Code requests reporting on Boardroom diversity policy Measurable Objectives Progress against measurable objectives

Regular reporting, highlighting ‘best practice’

2013 Change in Company Law to require reporting of gender breakdown for

Whole organisation ‘Senior management’ The board

Infographics in annual reports, very visual messages

Gendered perceptions

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Institute of Leadership & Management, 2011. Sample: 2,960 practising leaders/managers

Clients are demanding Diversity

“Clients have asked us to respond on gender diversity indicators when evaluating our proposal – we need to meet their KPIs to get the deal”

“We’ve entered pitches with an all-male team to come across a team with 50% women on the client’s side and faced an adverse reaction”

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30% Club Professional Service Firms Initiative 2012

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Mark Carney, Bank of England Governor says:

“targets are essential to build a diverse workforce and for embedding diversity into

talent and performance management”

Although business hates the idea of quotas, it can see that targets are a useful mechanism for change

They are enjoying the positive publicity

Targets

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Many banks and most big law firms have publicly declared senior management targets for (gender) diversity. Lloyd’s Banking Group stretch target: 40% of top 5,000

global senior management positions to be held by women by 2018.

Linklaters: 30% female Executive Committee and International Board by 2018

Royal Bank of Scotland: 30% “ExCo-3” female by 2020 and 50% by 2030

Ashurst: 40% of all partner promotions; 25% of Equity Partners; and 25% of all Management positions to be female by 2018

Targets

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Joint CEO of Herbert Smith Freehills, David Willis, said

“These targets have tangible benefits for the whole business – as well as promoting the best talent, they will help us meet the needs of our clients and bring diverse perspectives to our

business and the business of clients”

Why are they doing this?

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Why are they doing this?

Because they know it makes sense in terms of: Actual benefits Perceptual benefits - Being seen to be

addressing the issue In line with ‘best practice’ highlighted by

corporate governance codes

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And so, what next?...

Continue voluntary ‘business-led’ approach Increase target to 33% for all FTSE350 companies All stakeholders to work together to increase

numbers of Chairs, SIDs and Executive Directors ALL remaining FTSE listed firms to take action Extend best practice from boards to Executive

Committee and Senior Management New independent steering body to reconvene as

catalyst, to monitor and report…

Some resources:

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Thank you for your attention

October 2014 Financial Reporting Council Monitoring Report of Corporate Governance Diversity reporting of FTSE 350:http://bit.ly/1s4bBc2

The Female FTSE Report March 2015 for updated boardroom figures and qualitative study from 30 senior leaders:http://bit.ly/1Bqaqs5

Lord Davies Five Year Closing Report October 2015http://bit.ly/1Wki02p