FTSE Women Leaders Review: the findings and recommendations
On 22 February 2022, the FTSE Women Leaders Review published its first report, which sets out new recommendations for improving female representation in FTSE 350 companies, as well as 2021 data on female representation in both the FTSE 100 and the FTSE 250. The review, which was announced by the government on 1 November 2021, builds on the work of the earlier Hampton-Alexander and Davies Reviews, being the ‘third and successor phase’ to the two reviews that came before it. Like its predecessors, it is to last five years.
There is now an even greater focus on the positive role diversity can play in improving company performance, with companies and business leaders acutely aware that the pandemic may have impacted working women more adversely than their male counterparts in terms of career development and progression. Diversity has also become an important part of ESG related risks and opportunities.
The Review’s findings
As with the Hampton-Alexander Review, the overall picture presented by the Review is largely positive. Key highlights from the Review include:
- female representation on boards stands at an average of 39.1 per cent across the FTSE 100, 36.8 per cent across the FTSE 250 and 37.6 per cent for the FTSE 350 which are all improvements from the year before;
- the representation of women in FTSE 100 leadership roles (the combined executive committee and direct reports) has risen to 32.5 per cent from 30.6 percent;
- there are only six companies with “one and done” boards (a phrase used to describe the potentially tokenistic appointment of one woman to a board). This is a significant decrease from 74 at the end of 2018;
- UK is now second in international rankings for women’s representation on boards at FTSE 100 level (behind France); and
- Investment trusts are the Top Ten Best Performers among the FTSE 250, they also make up around half of the 92 FTSE 250 Boards already at 40%, or more.
The four new Recommendations
To build on the progress achieved by the Hampton-Alexander Review, the Review sets out 4 recommendations:
- an increased voluntary target for FTSE 350 Boards and for FTSE 350 Leadership teams to a minimum of 40% women, by the end of 2025;
- FTSE 350 companies to have at least one woman in the chair or senior independent director (SID) role on the board, and/or one woman in the chief executive or finance director role in the company, by the end of 2025;
- key stakeholders to set best-practice guidance, or have mechanisms in place to encourage FTSE 350 Boards that have not achieved the prior 33% target, to do so; and
- the scope of the review to be extended to include the largest 50 private companies in the UK by sale.
What next?
The financial services regulators (Bank of England, Financial Conduct Authority and the Prudential Regulation Authority) issued a discussion paper in mid-2021 and set out several proposals that would require firms to address diversity and inclusion. The consultation has started in in Q1 2022, and a policy statement is expected in Q3 2022.
The Parker Review Report will be published next week, which will report upon progress of two targets:
- FTSE 100 companies to have at least one director from a minority ethnic group on its Board by 2021.
- FTSE 250 companies to have at least one director from a minority ethnic group on their Boards by 2024.
There is no legal obligation for companies to publish their ethnicity pay gap (EPG), unlike the requirement to disclose gender pay gap (for companies with over 250 employees). Many organisations, however, have voluntarily chosen to publish their EPG. This trend is expected to increase in 2022.