Women on Boards

The third annual progress report on Women on Boards (the 2014 Report) has been published by Lord Davies.  The figures show that there has been continued progress towards meeting the target set by Lord Davies in his first report in 2011 of at least 25% of board positions in FTSE 100 companies being held by women by 2015.

As of 3 March 2014, in the FTSE 100:

  • women accounted for 20.7% of overall board directorships (up from 17.3% in April 2013)
  • women accounted for 25.5% of non-executive directorships and 6.9% of executive directorships
  • women accounted for 28% of all board appointments in 2013/14
  • there remained only two all male boards (since reduced to just one)
  • fewer than 50 more appointments of women are needed to reach the 25% target.
  • There has also been progress at the FTSE 250 level. As at 3 March:
  • women accounted for 15.6% of overall board directorships (up from 13.2% in 2013)
  • women accounted for 19.6% of non-executive directorships and 5.3% of executive directorships
  • women accounted for 33% of all board appointments in 2013/14
  • 48 boards remained all male.

Although clearly good progress has been made, the report makes the point that the UK's voluntary, self-regulation approach is under scrutiny.  The European Parliament voted in favour of quotas in November 2013 although currently there is deadlock on this in the European Council.  While several other member states also favour self-regulation rather than legislation on this issue, the report makes the point that the FTSE 350 needs to show it can deliver real change on a voluntary basis over the next year to avoid the prospect of compulsory targets being introduced through legislation.

There is also a clear acknowledgement in the report that most of the improvements in representation come from increases in non-executive director appointments and that the focus needs to move to increasing the number of women executive directors.

The original Davies report in 2011 laid down ten Recommendations to help achieve the target set and the 2014 Report considers the progress made towards achieving the ten Recommendations and sets out a number of areas for stakeholders to explore over the next year to help increase gender balance on British boards.  One of the recommendations of the 2011 report was that executive search firms should draw up a Voluntary Code of Conduct addressing gender diversity and best practice in relation to relevant search criteria and processes relating to FTSE 350 board level appointments.  We report separately in this newsletter on the recent report published on the progress of this voluntary code.

The 2014 Report can be found here together with the BIS press release.

Another recent piece of research issued jointly by the 30% Club, KPMG and YSC (business pychologists) called 'Cracking the Code' looks at the issue of why the internal pipeline of executive female talent coming through to Board positions is not as strong as it could be.  The 30% Club has its own stated aim of having 30% female representation of boards by the end of 2015 but recognises that this will depend on the appointment of more female non-executive directors.  The research looks at some of the perceived myths about why women may not become executive directors and seeks to dispel them and to provide practical solutions for companies to consider implementing to help improve the situation.

The 'Cracking the Code' research can found here.

PIRC UK Shareholder Voting Guidelines 2014 issued

Pensions Investment Research Consultants (PIRC) published the 21st edition of its UK Shareholder Voting Guidelines which replaces the 2013 version. PIRC is an independent research and advisory body acting on behalf of institutional investors to raise governance and corporate social responsibility concerns with investee companies. PIRC applies its guidelines to all the listed companies it covers on the UK market (including companies incorporated outside the UK). The Guidelines set out PIRC's detailed views on good corporate practice and look specifically at the following areas:

  • the Board 
  • the report and accounts, audit and financial controls 
  • shareowner rights, capital stewardship and corporate actions 
  • corporate structure and transactions 
  • directors' remuneration 
  • investment companies 
  • sustainability and non-financial reporting. 

The Guidelines are available to order on the PIRC website (http://www.pirc.co.uk)

QCA review of corporate governance disclosures by small and mid-cap quoted companies

In May 2013 the Quoted Companies Alliance (QCA) launched its Corporate Governance Code for Small and Mid-Sized Companies (the QCA Code). The QCA, in partnership with UHY Hacker Young, has recently produced a report which analyses the corporate governance disclosures of 100 small and mid-size quoted companies against the minimum disclosure requirements of the QCA Code.

The report concludes that companies need to do more to link disclosures (both financial and narrative) to corporate strategy and for companies to better present their work, using the annual report and accounts to advise shareholders and other stakeholder as to how and why a company does what it does.

A copy of the report can be found here.

For more information on the work of the QCA or to purchase a copy of the QCA Code please click here.

Best Practice Principles for Providers of Shareholder Voting Research & Analysis

In 2012 the European Securities and Markets Authority (ESMA) consulted on whether binding measures were necessary to regulate how proxy advisors interact with investors and issuers, collecting evidence from a variety of stakeholder groups to gain an understanding of the state and structure of the market.  In its feedback statement published in February 2013, ESMA concluded that the introduction of binding measures was not justified but that several areas, in particular in relation to transparency and disclosure would benefit from a collective approach from the proxy advisory industry and recommended that the industry develop its own Code of Conduct.

As a result, a number of industry members formed the Best Practice Principles Group (BPPG) to develop a set of best practice principles.  Draft proposals were put out for consultation in late 2013 and, following a review of the feedback, the Best Practice Principles for Providers of Shareholder Voting Analysis were recently published.  Three main Principles are set out relating to service quality, conflicts-of-interest management and communications policy. The Principles apply on a comply or explain basis.  The Principles are supported by Guidance which explains the background, relevance and application of the Principles.

The BPPG will monitor implementation of the Principles and will review the Principles and Guidance within 2 years of launch.  ESMA will also perform a review of implementation of the Principles and their monitoring by BPPG at the beginning of 2016.

The Best Practice Principles can be found here.