A gentle touch is too feeble to transform the C-suite

Many companies do not track data on executive balance, let alone act to improve it

The UK’s Women on Boards review has come up with some stretching new recommendations. So stretching, in fact, that getting companies to follow them will require much more than the gentle encouragement currently on offer.

Having achieved its goal of filling a quarter of FTSE 100 boards with women by 2015, the review has issued its next targets. Not only should a third of boards at Britain’s 350 largest public companies be made up of women by 2020, but a third of FTSE 100 executive committees and of those reporting to them should be female by then too.

The new targets are to be lauded for their ambition, particularly since the proportion of women on FTSE 100 boards has stalled at 26 per cent, and there has been a significant fall in female board recruits.

So the flurry of activity last week from the review’s new heads, Sir Philip Hampton and Dame Helen Alexander, was welcome. But translating ambition into reality will require much more. It will need significant action by both government and regulators.

This is partly because the new targets will be harder to meet. While the UK’s target-based approach has improved matters, there have been persistent concerns that appointing more women to boards has had little effect on the gender imbalance at senior management level. The number of women on FTSE 100 executive committees has flatlined for the past eight years at below 19 per cent, and there are 12 FTSE 100 companies, including Royal Dutch Shell, Babcock International and Barclays, that have all-male executive committees.

Getting more women on boards was the responsibility of chairmen, many of them coaxed into activity by the 30% Club, which campaigned effectively on the issue. But the next stage will be down to chief executives. For some, like Paul Polman at Unilever or Andrew Mackenzie at BHP Billiton, improving diversity at the companies they manage is already an important aim. But for others, it ranks low on the list of operational imperatives.

This latter group will need significant persuasion. The plan of the Hampton-Alexander review, to name and shame companies not moving towards its 33 per cent target on an annual basis, will be insufficient. There are good reasons why a bigger stick is needed.

Many companies do not even track data on gender balance in their pipelines of senior talent, let alone act to improve it. The Hampton-Alexander review received a feeble response to its request for data on numbers of women on executive committees. Ninety-two of the FTSE 100 responded but just 142 of the FTSE 250 did, suggesting that either companies are embarrassed about going public or simply do not track it.

The review recommends FTSE 350 companies should have to disclose the gender balance of their executive committees, or of those reporting directly to them, as part of their annual responsibilities under the corporate governance code. This would require revision of the code; the Financial Reporting Council, which administers it, “stands ready” to do this in the wake of the Hampton-Alexander recommendations.

Even if this happens, though, it will not be enough. The code is voluntary. And compliance is spotty. More than a third of companies fail to meet its requirements and while nearly three-quarters of FTSE 100 companies — 72 per cent — comply fully with the code, only 57 per cent of the FTSE 250 do so.

So far, British efforts to improve diversity using carrots have worked as well as mandatory quotas in other nations. Despite the fact that six out of the 10 leading countries on boardroom gender diversity impose legislative quotas, the UK is ranked sixth globally. But for targets to continue to be effective, and get progress back on track, they need much sharper teeth.

sarah.gordon@ft.com


Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.