Lord Davies of Abersoch published on 29 October 2015, a five year review of his 2011 report aimed at improving the gender balance at the top of British business.

There has been a significant improvement in the representation of women in British boardrooms in recent years. The FTSE 350 now has more female board members than ever before, with 550 new female appointments in just over four years. Women’s representation on the boards of the FTSE 100 has more than doubled to 26% in five years (exceeding the 25% target set in 2010) and 19.6% on FTSE 250 boards. There are now no all-male FTSE 100 boards (there were 21 in 2011). However, Lord Davies’ review makes it clear that more needs to be done to bridge the gender gap.

Approach and Ambition

The review considers the voluntary approach adopted by UK plc of setting realistic, achievable and stretching targets for business as a key driver of progress.

While the FTSE 100 lies in 6th place in Europe in terms of female representation on boards, the review points out that many of the countries that have been successful in adjusting the gender balance in boardrooms have done so through the introduction of legislative quota regimes. The UK has, to date, chosen not to adopt this approach. Lord Davies notes that whilst faster progress may be desirable, it is unclear whether these rapid routes to gender balance are sustainable or in the longer term interests of women and business. The review stresses that the lack of gender diversity on British boards should be considered a key business issue impacting on global credibility, reputation, the longer-term stability of the UK’s economy and its competitive position on the global stage and treated accordingly rather than (only) as an equality or diversity issue.

Stakeholder Engagement

The review considers that the support of executive search firms is key to improving the gender balance on UK listed boards. The search community drafted its own ‘Standard Code of Conduct’ for recruiting women to FTSE boards which is now endorsed as best practice by over 80 firms involved in board level searches. A more exacting best practice code, the ‘Enhanced Code of Conduct’ has now been produced, this time with hard performance criteria, as well as qualitative measures. The Davies review notes however that the investor community as a whole has yet to gather serious momentum in considering the Women on Boards agenda and encourages the investment community as a whole, to use its collective voice to greater effect and consider establishing guidelines of best practice.

Talent Pool

The Davies review notes that early concerns that targets for women on boards would lead to a small number of very experienced women sitting on a substantial number of boards rather than expand the pool of women with board experience were misplaced. Only 32 of 244 women hold more than one FTSE 100 directorship. However, it is worth noting that of the 210 new female appointments made since 1 March 2011, only 22% had no previous listed board experience.

Whilst there has been an increase in representation of women of both non-executive and executive appointments in the FTSE 100, the numbers of female executives continues to remain low. Of the 92 women who currently have executive roles in addition to a non-executive role, 88% hold roles either in corporate organisations or professional service firms. Only eight women currently hold executive positions in ‘non-traditional’ sectors.

Next steps

Lord Davies’ review challenges the UK to continue with its business-led approach whilst increasing the voluntary target for women’s representation on Boards of FTSE 350 companies, to a minimum of 33% to be achieved in the next five years and, at the same time, increasing progression of women to the roles of chair, senior independent and executive director.

Practical Impact

Whilst the campaign for gender balance on British boards has clearly led to a marked culture shift in top businesses across the UK, its impact has focussed on non-executive appointments to the boards of FTSE 350 companies - the number of women FTSE 100 CEOs has stagnated since 2011 and remains as low as 9.6%. The progress that has been made so far, whilst welcome, will only continue if every board appointment (executive and non-executive) is subject, in the words of Lord Davies, to laser focus in the future. The steering group has stated that it does not believe that the quotas imposed in Continental Europe are warranted but raises the concern that the UK will fall behind its European competitors if it does not continue to progress past 26% representation. Moreover, the increase in the number of women on boards now also needs to translate to progress on gender inequalities across the workplace such as the closing of the gender pay gap.

An update to Lord Davies’ findings will be published by the steering body in consultation with key stakeholders at the beginning of 2016.