Shortly after the publication of the Parker Review consultation report on ethnic diversity which we reported on last month, the Hampton-Alexander Review published a report on improving the gender balance in the leadership of FTSE companies. This article looks at the key recommendations from this report.
Hampton–Alexander Review: improving gender balance in FTSE leadership
The Hampton-Alexander Review has published its report on improving gender balance in the leadership of FTSE 350 companies. The Review builds upon the work of the Davies Review which has led to a significant increase in female representation on FTSE boards. The Davies target of 25% female representation on FTSE 100 boards by 2015 has been met, and in his final report late last year Lord Davies set a new target of 33% representation across the FTSE 350 by 2020. The Hampton-Alexander report re-affirms this target but shifts the focus to the executive pipeline, recognising that the lack of women in senior executive positions below board level is impeding further progress. The report adopts the same approach as Davies in setting a voluntary framework which it expects businesses to support and deliver rather than seeking to impose mandatory rules. The key recommendations are:
Women on boards:
- FTSE 350 companies should aim for a minimum of 33% women's representation on boards by 2020
- there should be an increase in the number of women appointed to the roles of chair, senior independent director and to executive director positions on boards of FTSE 350 companies
- FTSE companies yet to address gender imbalance on their boards should take prompt action to do so.
FTSE women leaders:
- action should be taken by CEOs of FTSE 350 companies to improve the underrepresentation of women on the executive committee and in the direct reports to the executive committee. Appropriate data and a clear plan of action is required
- FTSE 100 companies should aim for a minimum of 33% women's representation across their executive committee and in the direct reports to the executive committee by 2020
- the chair of the nominations committee should take an active role in overseeing the progress made to improve women's representation on the executive committee and direct reports to the executive committee. Actions plans should be reviewed and progress assessed at least once a year
- FTSE 350 companies should voluntarily publish details of the number of women on the executive committees and in the direct reports to the executive committees on an annual basis in the annual report and accounts and/or on websites.
- the FRC should amend the UK Corporate Governance Code to require all FTSE 350 companies to disclose the gender balance on the executive committee and direct reports to the executive committee in their annual report
- in consultation with business, the government should consider how best to clarify or supplement the definition of senior manager for the purposes of the requirement to disclose gender balance among directors, senior managers and employees in the strategic report. The current definition does not easily lend itself to making clear comparisons between companies.
- progress on gender balanced boards and in the leadership ranks of FTSE 350 companies should be assessed as a key corporate governance issue when considering responsibilities under the Stewardship Code
- all institutional investors should have a clear process for evaluating disclosures and progress on gender balance for FTSE 350 investee companies at board level, on the executive committee and in the direct reports to the executive committee. They should also have a clear voting policy on gender balance. This could include voting against the re-election of chairs and nomination committee chairs and the annual report and accounts where insufficient measures are in place to address gender imbalance
- investors should discuss and engage with investee companies on gender balance and vote in accordance with their policy. Voting records should be publicly disclosed.
Further recommendations apply to executive search firms which are asked to consider extending their codes of conduct to include the executive committees and direct reports to the executive committees. A link to the Review report can be found here.