FTSE 350 Laggards Resist Trend Of Rising Gender Diversity In UK Boardrooms

Being unwilling to engage on an issue can be a good indication of a mindset resistant to change. Figures released today show the FTSE 100 on track to reach a target of 33% of board positions going to women by 2020 and the FTSE 250 making steady progress towards it. But there remain 14 companies in the FTSE 350 with one woman or less on their board who have remained silent on communicating their views on the benefits of gender diversity, when invited to do so. Two of these are among the four remaining companies in the FTSE 350 with all-male boards.

In the FTSE 100, 32.1% of board positions are now held by women, the UK government-backed independent Hampton-Alexander Review revealed today. Hitherto slow, progress in the FTSE 250 has also taken a jump forward, with 27.5% of board positions now held by women, up from 24.9%. But, despite steady pressure from investors and the Review, the reluctance by some businesses to open their doors to female talent is clear. Two of the companies with all-male boards are in the property investment sector. Diversity and inclusion in the critical property sector, which is well behind on diversity of any kind, was covered recently on Board Talk.

In March this year The Investment Association which represents investment managers in the UK with members collectively managing over £7.7 trillion, and the Hampton-Alexander review jointly wrote to 69 companies in the FTSE 350 with one woman or less on their board, asking them to set out what actions they were taking to meet the 2020 target. While more than half these companies confirmed their commitment to achieve the target either by 2020 or in the near future - and 20 have added another woman to the board since then - 14 companies have not responded to the letter.

‘‘Investors want to invest in businesses that demonstrate they are diverse and inclusive because this leads to better decision-making and avoids group think” said Chris Cummings, Chief Executive of the Investment Association (IA). While it seems that many companies are now getting the message, “it is especially disappointing that 14 companies are still falling so short of shareholder expectations by having just a single woman on their board” he added.

“Adopting this ‘one and done’ attitude is not good enough, and investors expect companies to up their game and explain clearly how they will set this right going forward” said Mr Cummings. The 14 companies are:

Source: Hampton-Alexander Review, London July 1 2019

The companies span a variety of sectors, but they are all in the spotlight today on the first day of July 2019, the day the portal opens for FTSE 350 companies to submit their senior leadership gender representation data to the Hampton-Alexander Review. Companies have just one month - until July 31 - to lodge the gender split of their Executive Committee and the Direct Reports to the Executive Committee via the portal.

Sir Philip Hampton, Chair of the Review, said: “ The FTSE 250 is working hard to catch up but still too many boards have only one woman and remarkably today there are four all-male boards in the FTSE 250.'‘

Two of those all-male boards involve the property sector. Daejan Holdings, a British-based property business, is part of the Freshwater Group of companies, with Benzion Freshwater as Chairman and MD. The company’s website reveals that, of its eight company directors, five have the surname ‘Freshwater’ - and they are all listed unusually by first initial, rather than by name. The property group is a large private landlord with significant holdings in the London market.

TR Property Investments, which also did not respond to the letter from the IA and the Review, is a UK-based investment company listed on the FTSE 250 investing in Pan-European equities and UK direct property. Hugh Seaborn is the Chairman, and also CEO of the Cadogan Estate. The TR Property Investments board is composed of four men, and the Chairman of the Audit Committee is David Watson, also a non-executive director at Hermes Fund Management LTD, where he chairs the Audit Committee.

Somewhat ironically, Hermes is one of the investment management firms that has long branded itself around the call for gender diversity in the quest for better corporate governance and business.

As a search on its own website for ‘gender diversity’ reveals, in 2017 it said: “With the 2017 voting season beginning to come to an end, we at Hermes EOS have made a conscious effort this year to encourage gender diversity in the boardrooms of listed companies. We have, for example, opposed the election of the chairs of the nominations committees – often the chairs of the company itself – in the UK of FTSE 100 companies with fewer than 25% women on the board and where we are not satisfied with the plans to increase this figure to the new goal of 33% by 2020. At FTSE 250 and US companies that lack any female board directors, we have recommended voting against the election of the nominations or governance committee chair.”

“More diverse boards, we believe, are likely to make better decisions. At the same time, this also sends an important signal to women and men inside and outside the organisation that the company is trying to tackle inequality” it said at the time.

Ferrexpo, the Swiss-based FTSE 250 iron ore company with assets in Ukraine, also has an all-male board - and did not respond to the HA Review. Earlier this month it appointed another male non-executive director, in the wake of “being rocked by a row with its auditor over charitable donations” according to a Financial Times report.

Graeme Dacomb, a former partner at Ernst & Young, was that non-executive director who was also appointed head of the audit committee. The FT report quotes Ferrexpo as saying that Mr Dacomb would join the independent committee investigating the possible misuse of funds by a charity in Ukraine and oversee the search for a new auditor. Ferrexpo’s board and its executive committee are all male.

Steve Lucas, the company’s Non-executive Chairman, has been a non-executive director at Tullow Oil, the Africa-focused energy company, since 2012, and this is its board. Mr Lucas has also been a non-executive director at Acacia Mining since 2013, the year the board announced its first appointment of a female non-executive director, Rachel English. She was appointed interim Chair of the board in 2018, and there is another female non-executive director.

The point of the illustrations is this: the pool of non-executive directors, CEOs and Chairs in the FTSE 350 is still overwhelmingly male, and pale. But it is not as if senior businessmen remain unexposed to boards which involve the participation of women at the top of Britain’s businesses. Given the overlap that often occurs between businesses and industry sectors in terms of board appointments, one might expect some of that experience of the richness of gender diversity to be carried over into backing fresh names for new roles with responsibility for changing the face of Britain’s boardrooms.

This sort of sponsorship of women into leadership positions by established male business leaders was backed by the UK government, with the discreet backing of royalty and the support of the Women’s Business Council last year, and an event at St James’s Palace hosted by the Duke of York was covered here, on Board Talk.

The fourth FTSE 350 company with an all-male board is Kainos, the software group, and it has only just joined the FTSE 250 in June, after listing four years ago. It has been a major supplier to the UK government with its digital solutions, and this is its board of directors, and its equality, diversity and inclusion policy on its website. Presumably its senior team have many UK government connections in its network, and are therefore well aware of this drive for gender diversity.

Increasing the number of women in the roles of Chair, Senior Independent Director and into Executive Director positions on boards is a UK-government backed priority for the FTSE 350, as it is about women in leadership positions. The Hampton-Alexander portal is now open for companies to submit their data on the number of men and women on the Executive Committee and the Direct Reports to the Executive Committee in the 12 months prior to June 30, 2019.

It is clear that there has been significant change in UK business - there were 152 all-male boards across the FTSE 350 in 2011, when Lord Davies first launched his review of the lack of female representation in Britain’s boardrooms (and this blog was first launched around that drive). But while the pressure has been kept up on the initiative for gender diversity, the world has changed very rapidly.

Many younger voices would argue - as Sir John Parker did in his review on the need for ethnic diversity in 2017 - that the United Kingdom needs urgently to address this need - and indeed, the new business models and multiple challenges we are facing around technological transformation require variety of thought and cognitive diversity in boardrooms for innovation.

Boards need to be more diverse in terms not just of gender, but ethnicity, nationality, age and education - which means varying experience and perspective and social background. There is an opportunity now to put into the position of Chair in the FTSE 350 some of those who could help lead the way forward - as previously suggested on Board Talk.

For the next dates in London’s diary to move this agenda forward at a faster pace, see the discussion around the release of Cranfield University’s Female FTSE Board Report on July 11. The 2019 Hampton-Alexander Report will be published on 13 November, 2019.

Cover photo credit: Fas Khan on Unsplash