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Board diversity in smaller UK companies
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The FTSE350 are going the right way of travel towards board diversity.
In 2011, MP Lord Davies launched the Women on Boards review. It set a voluntary target for the top 100 UK companies to make sure at least a quarter of their boards were women.
They met their target. On average, each of the boards were 26 per cent female by 2015.
The FTSE350 was proud of their voluntary and collaborate achievement. They made faster progress than any other country at the time.
The next target for these companies is 33 per cent female representation by the end of 2020. This isn’t just for boards, but also at senior management level.
We are yet to see if they will have another reason to celebrate by achieving these targets.
But what about the smaller companies?
Our Company Matters team sits in over 50 of their clients’ boardrooms. This includes one board meeting and at least one committee meeting a week. We see what’s happening first hand.
But we wanted to look more deeply and widely into board diversity in UK FTSE Small Cap and AIM 50 companies.
Board diversity is not only about gender, ethnicity, nationality and other identity factors. But these are readily measurable from outside the boardroom. They’re a useful indicator of a board’s likely acceptance of the benefits of diversity of thought.
Caroline Emmet from the team organised the research with support from her colleague Paul Johnston, the Company Matters team and expert in diversity research, Dr Scarlett Brown.
The results focus on the gender and ethnic diversity of the boards of these smaller companies. This includes differences in roles, age and tenure. They also looked at the quality of companies’ reporting on diversity, mirroring existing analysis of the FTSE 350 companies’ annual reports.
What did they find?
Some of the results were a pleasant surprise to Caroline. She expected worse, as the smaller companies had avoided the microscope until now.
But she’s clear that there’s a long way to go and there’s much to do. It isn’t difficult for some companies to slip back into an all-male board.
Caroline and her team also looked at whether companies had a clear diversity policy. And if they mentioned gender and ethnicity, or both. Many were difficult to understand or had a standard boilerplate.
Confusingly, a lot of companies that didn’t have a diversity policy talked more about diversity in their reporting than those that didn’t. And many appeared to consider that diversity and appointment on merit were mutually exclusive.
Some companies appeared to gloss over a lack of diversity or board refreshment by limiting the details on directors included in their annual reports.
So what can you do?
Be open to the idea of recruiting NEDs from outside the usual pools
Revisit your NED recruitment criteria to make sure it doesn’t exclude those applicants – C-suite or board experience is not the only indicator of talent and merit
If you’re engaging an executive search agency, give them clear instructions on diversity
Encourage younger people and those from non-traditional backgrounds to apply for NED roles; we need role models to inspire and motivate our employees
Use clear language in your board diversity policy. Don’t leave it open to interpretation
Include diversity considerations in your succession planning and board evaluation
Be consistent and authentic in your reporting. The more ambiguous you are, the less genuine you seem
We mustn’t just move on to the next issue because we’ve unlocked the statistics. We’re only just getting started.