what next? The final Hampton-Alexander review
The effectiveness of the Review must lead to more, not less, scrutiny of boardroom diversity.
We've come a long way since attention was first paid to the lack of diversity on UK Corporate Boards. There has been a step change in the number of female FTSE350 board members, with the target of 33% overall being achieved. This hasn't simply happened through good will, but through a combination of the Hampton-Alexander Review's annual scrutiny and progress monitoring, the 30% Club's pressure on business and Women on Boards UK's own role in supporting female candidates to step up.
With the publication of the final Hampton-Alexander report, it seems we are about to stop collecting the data on the percentage representation of women on boards and committees. Only a government led initiative, or a regulator, has the power to collect this data. And we know, without firms feeling compelled or forced to report gender data, nothing will happen - as demonstrated by the 50% of companies who chose not to publish their gender pay gap data when statutory enforcement measures were suspended in 2020.
Now is no time to take our foot off the gas.
There are still only 17 FTSE 350 CEO’s and 39 Board Chairs who are women. New board appointments are still majority male and female representation is far from where it needs to be in executive teams (at C-Suite level and below). All this is to say nothing of the inching nature of progress on ethnic diversity, where it looks less likely by the day that the Parker target of 'one by 2021' will be achieved to end all-white FTSE 350 boards.
Scrutiny needs to be applied outside the FTSE350 to all listed firms. It should not be inevitable that the FTSE350 is ahead on boardroom diversity, as our CEO Fiona Hathorn points out in a Board Agenda article recently following the Company Matters report published last week on the FTSE Small Cap and AIM companies. With the investment required to improve diversity being relatively small, and the business benefits potentially significant, biggest need not mean best in this field.
Progress is not linear - as we saw when all-male boards went extinct in the FTSE350 very briefly last year. Hopefully last week's announcements that we again have at least one woman on every FTSE350 board will remain the case for longer. It would be naive to suppose there is a widespread consensus on the need to maintain and expand diversity in UK corporate boards to ensure the continued success of businesses, and the economy overall. And even if there were, measurement remains vital as the saying goes: 'what gets measured, gets managed. And what gets managed, gets done.'
The efficacy of the Hampton-Alexander Review should be taken as 'proof of concept'.
We can now see that the measurement and monitoring approach taken in the UK is effective. Internationally, other countries in Europe and some US states are taking an alternative approach by bringing in mandatory quotas for board diversity, impatient with the glacial progress (even slower than in the UK at times).
At Women on Boards, we don't like quotas, but we like the results they achieve. We now know the UK can achieve and maintain those same results with a ‘Business-led and data-led approach’. Indeed, our sister organisation in Australia is seeing significant progress, supported by the more wide-ranging reporting requirements for all companies employing over 100 people - brought in by Australia's Workplace Gender Equality Act 2012.
However, these results will only be expanded and maintained if the activity that produced them continues.
What next? Rather than receding into the past, we should view Hampton-Alexander’s effective work as having paved the way.
We now have an opportunity to bring in long-term, comprehensive scrutiny on diverse representation in the UK’s leading firms.
In the report, Sir Phillip Hampton clearly believes there should be continued focus on data collection. In particular, he points to the executive level and the desirability of looking not just at listed companies but also at large private companies too. The report also features Dame Helena Morrissey describing the ‘Green Park Rule’ where the board ensures that “any decision affecting 1% or more of our company’s annual revenue can only be taken by a group diverse in both gender and racial composition” (p25) . This highlights the more current way of thinking about diversity in the round, not through the lens of gender alone.
It is vital that the UK's efforts on monitoring and scrutiny of diversity in corporate UK continue and indeed are enhanced. This is important, not just for fairness, but to ensure our businesses harness the benefits available from our country’s diversity.