Equality and Human Rights Commission · Commissioner at the Equality and Human Rights Commission 6....

An inquiry into fairness, transparency and diversity in FTSE 350 board appointments

Equality and Human Rights Commission

2

ContentsList of figures and tables p.4

Foreword by Laura Carstensen p.6

Executive summary p.7

Background p.7 Our approach p.7 Our methodology p.8 Ourfindings p.8 Recommendations p.13

Chapter 1: Setting the scene p.17

Inquiryfocus p.17 Theimpactofboarddiversity p.18 Non-regulatoryleversforchange p.19 Thelegalframework p.21 Ourapproach p.22 Gatheringevidence p.23

Chapter 2: Boards’ performance on gender diversity p.25

Meetingthe25%target p.25 Conclusions p.31

Chapter 3: Board evaluations p.33

Approachestoboardevaluation p.33 Benefitsofboardevaluations p.36 Conclusions p.37

Chapter 4: Diversity policies and targets p.39

Boarddiversitypolicies p.39 Boarddiversitytargets p.40 Diversitypoliciesandtargetsforseniormanagementteams p.44 Dotargetsmakeadifference? p.49 Conclusions p.50

Chapter 5: Role descriptions p.51

Analysisofskillsrequirementsofnon-executiveroledescriptions p.52 Requirementsforpeoplewithspecificprotectedcharacteristics p.54 Requirementsforpreviousboardexperience p.55 Chemistryandfit p.57 Conclusions p.59

3

Chapter 6: The search process p.61

Theuseofexecutivesearchfirms p.62 Companyinstructionstoexecutivesearchfirmsondiversity p.64 Theexecutivesearchfirmcommitmenttodiversity p.66 Wideningthesearchprocess p.68 Conclusions p.76

Chapter 7: Selection p.77

Selectionforlonglistsandshortlists p.78 Interviews p.80 Chemistryandfit p.81 Conclusions p.83

Chapter 8: Nomination committees p.85

Theroleofthenominationcommittee p.86 Compositionofappointmentpanels p.89 Knowledgeofequalityandcorporategovernancerequirements p.90 Conclusions p.92

Chapter 9: Improving diversity in the talent pipeline and the candidate pool p.95

Challengestoincreasingtherepresentationofwomeninthecandidatepool p.96 Encouragingapplicationsfromwomenforseniorandboardappointments p.98 WideningthecandidatepoolbeyondtheFTSE350 p.101 Developingthefemaletalentpipelinewithinthecompany p.106 Companies’understandingofpositiveaction p.112 Conclusions p.114

References p.115

Annex 1: Terms of reference for the inquiry p.117

Annex 2: Methodology—inquiry evidence-gathering and analysis p.118

Annex 3: FTSE 350 companies and executive search firms who did not respond to the Commission’s survey and those who did respond p.122

Contacts p.128

List of figures and tablesFigure 2.1:FTSEcompanieswith25%ormorewomenontheirboards

Figure 2.2:HowdidFTSE350boardsincreasetheproportionofwomenbetween2012/13and2013/14?

Figure 2.3:FTSE100andFTSE250companiesmakingappointmentsbetween2012/13and2013/14,andtheeffectonthenumberofwomenonboards(bynon-executivedirectorsandexecutivedirectors)

Figure 2.4:Proportionofwomeninexecutiveandnon-executivedirectorrolesinFTSE100companiesin2013/14


Figure 2.6:Numberofmenandwomenholdingexecutiveornon-executivedirectorrolesonFTSE350boardsin2013/14

Figure 3.1:Companiesthathaveevaluatedboardeffectivenessincludingmale/femalecomposition,byproportionofwomenonboards

Figure 4.1:Companieswithaboarddiversitypolicythatincludesagenderobjectiveortarget,byFTSE100andFTSE250companies

Figure 4.2:Companieswithaboarddiversitypolicythatincludesagenderobjectiveortarget,byproportionofwomenontheboard

Figure 4.3:Companieswithaseniormanagementdiversitypolicy,byFTSE100andFTSE250

Figure 4.4:Companieswithaseniormanagementdiversitypolicyandagenderobjectiveortarget,byFTSE100andFTSE250

Figure 4.5:Companieswithaseniormanagementdiversitypolicyandagenderobjectiveortarget,byproportionofwomenontheboard

Table 5.1:Mostcommonskilldescriptionsinnon-executiveroledescriptions

4

Figure 6.1:FTSEcompanieswhorequiretheexecutivesearchfirmstheyusetobesignatoriestotheVoluntaryCodeofConduct,byproportionofwomenonboards

Figure 6.2:FTSEcompaniesusingnetworksofcurrentandrecentboardmemberstoadvertiseboardvacancies,byproportionofwomenontheboard

Figure 8.1:Useofcompanychairand/ornominationcommitteechairand/ornominationcommitteemembersinnon-executivedirectorappointmentsinFTSEcompanies

Figure 8.2:Trainingforthoseinvolvedintheappointmentprocesstoensureawarenessofrelevantlegislation,byFTSE100andFTSE250

Figure 9.1:ActivitiestoencourageapplicationsfromwomenforseniorandboardappointmentsbyFTSE100andFTSE250

Figure 9.2:Non-executivedirectorappointmentsmadefromoutsidetheFTSE350,bygenderofappointmentandproportionofwomenontheboard

Figure 9.3:ExecutivedirectorappointmentsmadefromoutsidetheFTSE350,bygenderofappointmentandproportionofwomenontheboard

Figure 9.4:ActivitiesundertakentoattractanddevelopfemaletalentbyFTSE100andFTSE250

Figure 9.5:Activitiesundertakentoattractanddevelopfemaletalentbyproportionofwomenontheboard

5

Foreword by Laura Carstensen

Increasingdiversityatboardlevel—andthroughoutcompanies—isacknowledgedasaprioritybybusiness,governmentandregulatorsaswellmanyshareholdersandcustomers.

Companieshavemadewelcomeprogressinincreasinggenderdiversityonboardsoverthelastfiveyears,withtheFTSE100sectorasawholemeetingthe25%targetsetbyLordDaviesbytheend of2015.

However,thisheadlineachievementmaskstherealityofhowindividualcompaniesareperforming:ourtopboardsstillremainmaleandWhite,andthelackofwomeninexecutivedirectorrolesatBritain’sbiggestcompaniesisparticularlystark.

Outdatedattitudesandopaqueselectionprocessesmakeimprovingdiversityachallenge.Ourinquiryfoundcontinuingrelianceon‘oldboys’networks’tosourcecandidates,reluctancetocastthenetmorewidelyandselectionbasedonvaguenotionsof‘chemistryandfit’,allofwhichleadtoboardsrecruitingintheirownimage.Despitetheevidencethatmanyfirmsarenowconductingboardevaluationswhichlookatdiversity,toofewactuallytranslatetheseintosettingpropertargetsandactionplans.Andaworryinglylargeproportionstillbelievethatpositiveactiontoencouragetalentedwomentoapplyforroles,orprovidethemwiththeskillstodoso,hasnoplaceintheircompany.

Asourtopcompaniescompeteinaglobalmarketplace,itisimportantthattheyselectthebesttalentforleadershiproles.Researchhasshownthatcompanieswithmorediverseboardscanoperatemoreeffectively,byunderstandingtheircustomers,andmoreinnovatively,bybeingmoreopentochange.Thiscaninturnleadtoincreasedprofitsandreturnstoshareholders.

Butthisisnotjustaboutcompanygrowth;it’saboutdoingtherightthing.Equalitylegislationexiststoensureeverybodyistreatedfairly.Thisreportshowsthatwhiletherehasbeenprogressinimprovingthenumberofwomenonboards,thereismorethatcanandshouldbedone.Companiesneedtolookatwaysofimprovingtheirappointmentprocesssothatitisobjective,transparentandfair,andselectsthebestcandidateonmerit.Theyneedtothinkaboutwaysofbroadeningthecandidatepoolsotheyconsideramorediverserangeofpeoplewithsuitableskillsandexperience.And,mostchallenging,iftheyaretocreatethefemalenon-executiveandexecutivedirectorsofthefuture,theyneedtoconsiderhowtheycanimprovethediversityoftheirtalentpipelines—andthismeansthinkingabouthowtheyrecruit,retain,developandpromoteemployees.

Wehaveseparatelypublished‘Howtoimproveboarddiversity:asix-stepguidetogoodpractice’.Ihopethisinquiryandtheaccompanyingguidancewillbeusefultoallcompaniestryingtoimprovethediversityoftheirboardsandtheirpipeline.Britishcompaniesthatfollowourapproacharemorelikelytoattractthebesttalenttotheirteamsandgrowtheirbusinessasaresult.

Laura Carstensen, CommissionerattheEqualityandHumanRightsCommission

6

Executive summary

Background InJuly2014theEqualityandHumanRightsCommission(‘theCommission’)launchedaninquiryintohowtheUK’s350leadingcompanies(theFTSE350),andtheexecutivesearchfirmstheyinstruct,recruitandselectpeopleforboarddirectorroles.Ouraimwastoidentifywhetherrecruitmentandselectionpracticesaretransparent,fairandresultinappointmentsonmerit,andtoidentifyareaswherecompaniesandtheiragentscouldmakeimprovementstothesepracticestoincreasethediversityofcompanyboards.

WewantedtoexaminehowcompaniesusedthelegalandregulatoryframeworksetoutintheEqualityAct2010andUKCorporateGovernanceCode,tofacilitatefairness,transparencyanddiversityintheirboardappointments.

TheEqualityAct2010requiresthatemployersdonotdiscriminateinrecruitmentprocesses.Italsoallowsthemtotake‘positiveaction’wherethereisreasontothinkthataparticulargroupisunder-represented.TheUKCorporateGovernanceCodestatesthatthereshouldbeaformal,rigorousandtransparentprocedurefortheappointmentofnewdirectorstotheboardandthatappointmentsshouldbemadeonmerit,againstobjectivecriteriaandwithdueregardforthebenefitsofdiversityontheboard(FRC,2014,p.11,B.2).

Our approachBasedonthisframework,ourinquiryexaminedtheuseof:

• boardevaluationstoidentifyrequiredskills,experienceandknowledge,andtoassessthegenderbalance

• diversitypoliciesthatincludeaspirationaltargetsforincreasingthenumberofwomenatboardandseniormanagementlevel

• roledescriptionsthatidentifyrequiredskills,experience,knowledgeandpersonalqualities

• searchprocessesusingawiderangeofchannels,includingadvertising,toencourageapplicationsfromdiversecandidateswithrelevantskills,experience,andknowledge

7

• selection,interviewanddecision-makingprocessesthatallowforobjectiveassessmentofcandidates’skills,experience,knowledgeandpersonalqualities

• nominationcommitteesinleadingappointmentsandtheirawarenessofequalitylaw,and

• activitiestoimprovediversityinthetalentpipelineandtowidenthepoolofcandidatesforboardroles.

Our methodologyWeaskedalltheFTSE350companiesandexecutivesearchfirmsthatweresignatoriestotheVoluntaryCodeofConductforExecutiveSearchFirms(whichsetoutbestpracticeingenderdiversityandsearch)toprovideinformationaboutboardappointmentsmadeinthe12monthsprecedingthelaunchofourinquiryinJuly2014.Wereceivedresponsesfrom92%ofFTSEcompaniesand28executivesearchfirmsthathadcarriedoutboardappointmentsinourtimeperiod.

Wealsointerviewedcompanyandexecutivesearchfirmrepresentatives,andbothsuccessfulandunsuccessfulapplicantsforboardroles.

Thisdatahasprovidedastrongbasisformakingthefindingsandrecommendationsinourinquiryreport,whicharesummarisedbelow.

Our findingsBoards’ performance on gender diversity

WeexaminedhowboardsareperformingongenderdiversityinlightoftheOctober2015announcementbyLordDaviesthattheFTSE100asagrouphadmetatargetof25%femaleboardmembers,theFTSE250wascloseto20%andtheFTSE350averageasawholewas21.9%.

Wefoundthatthisheadlinefigureconcealedwidevariationsintheperformanceofindividualcompanies.Mostcompaniesstillfellbelowthe25%level.Fifty-fiveFTSE100companieshadreachedorexceededthe25%target,but45hadnot.Two-thirds(168)ofFTSE250companieshadalsonotmetthistarget.

While47%ofFTSE350companiesincreasedtheirfemaleboardrepresentationovertheperiodofourreview,in46%ofcompaniestheproportionofwomenontheirboardseitherremainedthesameorevendecreased.

8

Whereimprovementshadbeenmade,thiswasasmuchduetoatrendtoreducingboardsizeasitwastoappointmentsofwomen.Of150companiesthatincreasedtheproportionofwomenontheirboards,31%(46)haddonesojustbyreducingtheiroverallboardsize-theyhadreducedthenumberofmenontheboardbutmadenofemaleappointments.Just38%ofthesecompanies(58)metthetargetpurelybyappointingwomenandnotreducingthesizeoftheboard.

Thelackofwomeninexecutivedirectorrolesisparticularlystark:nearlythree-quartersofFTSE100companiesand90%ofFTSE250companieshadnofemaleexecutivedirectorin2013/14.

Board evaluations

Boardevaluationsareanimportantmethodofassessingskills,experienceandknowledgeontheboard,andreviewingdiversity.Ourinquiryrevealswhileoverhalfofcompanieshadcarriedoutboardevaluationswhichtookintoaccountgenderdiversity,overathirdhadnot.

Diversity policies and targets

Wherewomenorothergroupsareunder-representedatboardlevel,companiescandevelopapolicywithaspirationaltargetstoimprovethediversityoftheboardoveraspecifiedtimescaleandestablishmeasurestoassessprogress.

Ourinquiryfoundthatthree-quartersofcompanieshadboarddiversitypolicies.However,aroundtwo-thirdsofthesehadnotsetobjectivesortargetstoincreasethenumberofwomenontheirboard.Forseniormanagement/executivelevels,lessthanhalfofcompanieshadadiversitypolicyandlessthantwo-fifthshadsetgendertargets.

Companieswithahigherproportionofwomenontheirboardsweremorelikelytohaveadiversitypolicythatincludedobjectivesortargetsfortheirseniormanagementteam.Companiesthatdidnothaveobjectivesortargetsfortheirboardorseniormanagementlevelweremostlikelytosaythatthesewereincompatiblewithappointmentonmeritortheydidnotbelievethatsettingobjectivesortargetscouldhelpdriveimprovement.

Role descriptions

Roledescriptionswhicharebasedonrelevantskills,experience,knowledgeandpersonalqualitiesthatareobjective,necessaryandjustifiableenableapplicationsfromawiderrangeofcandidatesandensurefairandconsistentassessmentduringtheselectionprocess.Thiscanhelpincreasediversityofappointments.Weexamineddocumentationfrom25companiesthatincludedroledescriptions.Wefoundthatsomecompanies

9

mettheserequirements.However,somecompanieshadsetrequirements—suchasapreferenceforcandidatesofaparticularsexorage—thatwouldalmostalwaysbeunlawfullydiscriminatory.

SomerequiredpreviousFTSEboardexperience.MakingFTSEboardexperiencearequirement,ratherthanspecifyingskills,experienceandknowledgeofissuessuchascorporategovernance,shareholderrelationshipsorglobaloperations,risksrulingoutsuitablecandidatesfromothersectorsandcoulddiscriminateagainstcandidatesfromgroupsthatareunder-representedoncompanyboards.

Someroleprofilesrequired‘chemistry’or‘fit’withotherboardmembersbutleftthesequalitiesundefinedandsoopentosubjectivejudgement.Thiscouldleadtoboardsrecruitingmembersintheirownimage.However,somecompaniestranslated‘chemistry’and‘fit’intoskillsorpersonalqualitiestheycouldassessintheselectionprocesssuchtheabilitytoworktogether,usejudgementandcontributetoconstructivedebatewhichwouldbebeneficialtoboardefficiency.

Search process

Ourevidencefoundthat90%ofcompaniesusedexecutivesearchfirmstosourcecandidates.Boardsthatusedexecutivesearchfirmshadahigherpercentageoffemalenon-executiveandexecutivedirectorsthanthosethatdidnot.Manyexecutivesearchfirmswereworkingtowidentheirdatabasestoincludemorediversecandidates.

However,somecompanieshadinstructedtheirexecutivesearchfirmspecificallytofindwomen,orsetquotasforthenumberofwomenonalongorshortlist.ThesepracticesarelikelytobeunlawfulundertheEqualityAct2010wheretheyresultintreatingbetterqualifiedmalecandidateslessfavourablyintheappointmentprocess.

Publicisingroleswidelyusingdifferentchannelscanencourageapplicationsfromdiversecandidateswithrelevantexpertise.Somecompanychairsrecognisedthatadvertisingcouldopenupboardopportunitiestoawiderpoolofdiversecandidates.However,mostFTSEcompaniesrelyonsearchand/orpersonalnetworksanddonotadvertiseroles,meaningawiderangeofdiverseapplicantswithrelevantexperiencehavenoopportunitytoapplyformostFTSEboardroles.

Almostathirdofcompaniesusingpersonalnetworksdidnotuseanyothermeansofpublicisingapost.Wefoundvirtuallynoadvertisingofboardrolesandlittleappetiteforitsuseamongexecutivesearchfirms,whosaiditwouldbeaninefficientmethodofselectionandthatadvertisingasensitiverolemayimpactonshareprice.

10

Selection

Using selection processes that allow for objective assessment of candidates’ skills, experience, knowledge and personal qualities ensures that the best candidates are appointed on merit.

Our evidence shows that many companies select candidates for long and shortlists based on criteria set out in role descriptions. Most companies also rely on different types of interviews using questions based on the role descriptions and the unique experience of candidates.

However, some companies did not have a transparent and objective selection process for non-executive appointments, relying on personal recommendation without competition, or informal interviewing unrelated to criteria in the role profile. Informal interviewing could result in inconsistent assessment and allow room for ‘unconscious bias’ to affect judgements. Female candidates were sometimes asked questions about balancing work and family responsibilities, implying stereotypical assumptions about their capabilities, which could lead to legal challenge from candidates.

Most companies assessed ‘chemistry’ and ‘fit’ of candidates throughout the appointment process and, as these terms were vague and undefined, this could lead to inconsistent assessments and recruitment of board members in their own image.

The nomination committee

The UK Corporate Governance Code recommends that the nomination committee take responsibility for board appointments. Our evidence shows that in around a quarter of non-executive director appointments the board chair and/or nomination committee chair and nomination committee members were involved in all stages of the selection process. Just 4% of companies relied solely on the company and/or nomination committee chair.

Some respondents thought it was appropriate that board chairs played a significant role in appointments. Others believed that too much power lay in the hands of the company chair when he or she also chaired the nomination committee, and that separating the roles of the chair and nomination committee might encourage more debate about role requirements and the merits of selecting particular candidates.

Companies with a higher proportion of women on their boards had more women on their selection panels, ensuring that diverse perspectives inform appointments.

Half of companies with no women on their board said that they did not use a specialist advisor or provide any training about discrimination to those involved in board appointments. Just 13% of companies provided training on equality law and avoiding unconscious bias to those involved in the appointment process.

11

12

Improving diversity in the talent pipeline and candidate pool

Companiesandexecutivesearchfirmssaidthelimitedpoolofsuitablyqualifiedfemalecandidateswastheirgreatestchallengetoimprovingtheproportionofwomenonboards.

Ourinquiryfoundlittleknowledgeoftherangeofpositiveactioncompaniescouldtaketoencouragewomentoapplyforrolesortohelpthemgainskillstoenablethemtocompeteonmeritonanequalfootingwithothers.Therewasalsolittleuseofthe‘tie-breakprovision’,aspecificformofpositiveactionwhichcanbeusedtoappointacandidatefromanunder-representedgroupwheretherearetwoormorecandidateswhoareequallyqualified.

Formostcompanies,theironlyactiontoencourageapplicationsfromwomenwastellingtheirexecutivesearchfirmtoincludewomenonthecandidatelist.Aroundhalfindicatedthattheyhadtargetedspecificwomen,askedforall-femalelists,orforwomentobeincludedonthelongorshortlists,whichrisksunlawfullydiscriminatingagainstanybetterqualifiedmalecandidates.

Somecompaniesencourageddiverseapplicationsbyensuringtheyhadtherightinternalprocesses,suchashavingapolicyorguidelines,settingtargets,conductingtheirownsearchesorbenchmarkingtheirperformanceagainstothercompanies.

Companieswith25%ormorewomenontheirboardsweremorelikelytohaveappointedexecutiveornon-executivedirectorsfromoutsidetheFTSE350thancompanieswithnowomenontheirboards,suggestingthatcompaniesseekingsuitablyqualifiedcandidatesfromawiderpoolareabletoincreasethelikelihoodofappointingawomantotheirboard.MostcompaniesandexecutivesearchfirmssaidcandidatesfromoutsidetheFTSE350wereunlikelytohavetheappropriateskills,experience,knowledgeor‘fit’,suchasfinancialskills,experienceofcorporategovernanceandshareholderrelationships,orknowledgeofanindustry.However,companiesthathadrecruitedfromoutsidetheFTSE350reportedbenefitsintermsofadditionalskillsandperspectivestheseappointmentsboughttotheboard.

Toencouragethedevelopmentofwomenthroughoutthecompany,andparticularlyatseniorlevels,somecompaniesusedpositiveactionsuchastraining,developmentandleadershipprogrammes,andprovisionofmentoringandnetworkingopportunitiesforwomen.Theyalsohadgoodmanagementpracticesthathelpedthemretainfemalestaff,suchasofferingflexibleworkingandsupportwhenwomenreturnedfrompregnancy.However,manycompanieswereresistanttousingpositiveactionmeasuresbecauseofconcernsaboutfairnessandmerit.

Recommendations

Board evaluations

• Useaboardevaluationtoassessthebalanceofskills,experienceandknowledgeontheboardandtoobtaininformationaboutitsdiversitycomposition.

Diversity policies and targets

• Useinformationaboutunder-representationtocreateadiversitypolicyfortheboardandseniormanagementwhichincludesaspirationaltargetsuniquetothecompany.

• Makesuretargetsreflectrealisticexpectationsofwhatcanbeachievedanddonotresultinpressuretotakepotentiallyunlawfulsteps.

• Reportannuallyonprogressinmeetingthesetargets.

Role descriptions

• Ensureroledescriptionsdescribenecessaryskills,experience,knowledgeandpersonalqualitiesfortherole,identifiedbytheboardevaluation.

• Avoidpotentiallydiscriminatoryrequirements,suchasapreferenceforcandidatesofaparticularageorsex,previousFTSEboardexperiencewherenotjustifiable,orusingtermssuchas‘chemistry’or‘fit’whicharesubjectiveandundefined.

Search process

• Selectanexecutivesearchfirmthatcandemonstrateitseffectivenessinimprovingdiversityinappointments.

• Avoidgivingunlawfulinstructionstoanexecutivesearchfirm,suchasrequestinganall-womanlonglistorshortlist.

• Broadenyourcandidatepoolbyadvertisingappointmentswidelythroughappropriatechannels,unlessaroleisbusiness-sensitive.

• Avoidrelyingonlyonpersonalnetworkstoidentifypotentialcandidates.

13

14

Selection

• Assesscandidatesconsistentlyagainstobjectivecriteriaidentifiedintheroledescriptionthroughouttheappointmentprocess.

• Avoidquestionsaboutirrelevantfactorsthatmayintroducebiasintotheassessmentprocess.

• Ensureselectorsdiscusstheirindividualassessmentswhereselectionisbasedonone-to-oneorinformalinterviews,toensureconsistencyandreducetheimpactofbiasbasedonirrelevantfactorsorstereotypes.

• Definetheskills,knowledge,experienceandpersonalqualitiesthatgiveriseto‘chemistry’and‘fit’andassesscandidatesagainstthesecriteria.

The nomination committee

• Ensurethenominationcommitteeisinvolvedintheappointmentsprocessalongsidethechair.

• Ensurethatthenominationcommitteeandselectionpanelsarediversetobringdifferentperspectivestotheselectionprocess.

• Providetrainingtoeveryoneinvolvedintheappointmentsprocessonequalitylawandavoidingunconsciousbias.

Inaddition,theFRCshouldclarifytheroleandremitofthenominationcommitteeanditschairinrelationtodiversityandboardappointmentsanditsdisclosurerequirementsintheannual report.

15

Improving diversity in the talent pipeline and candidate pool

• Encourageexecutivesearchfirmstoidentifywaysofattractingmoreapplicationsfromwomen,andquestionthefirmsabouttheireffortsifthecandidatelistisnotdiverse.

• WidenthecandidatepoolforboardrolesbyconsideringsuitablyqualifiedindividualsfromoutsidetheFTSE350,suchastheprofessions,thenot-for-profitandpublicsectors,andacademia.

• Usepositiveactionmeasurestoencourageindividualsfromunder-representedgroupstoapplyforrolesortohelpthemgainskillswhichwillenablethemtocompeteonmeritonanequalfootingwithothers,suchastraining,developmentandleadershipprogrammes,mentoringandnetworkingopportunities.

• Usethetie-breakprovisiontoselectacandidatefromanunder-representedgroupwheretherearetwoormorecandidateswhoareequallyqualified.

• Adoptmanagementpracticesthatsupportwomen’sretention,suchasimprovedmanagementofwomenwhoarepregnantorreturnfrommaternityleave,flexibleworkingandflexiblecareerpaths.

Weexpandontheserecommendationsinthisreportandinourguidance‘Howtoimproveboarddiversity:asix-stepguidetogoodpractice’.

16

‘Despite women making up over half the population, completing higher levels of education than men, and entering business and the professions in increasing numbers, they are still under-represented in senior management roles and on the boards of the UK’s top companies.’

17

Chapter 1: Setting the sceneDespitewomenmakingupoverhalfthepopulation,completinghigherlevelsofeducationthanmen(ONS,2001–14)1andenteringbusinessandtheprofessionsinincreasingnumbers(ONS,2001;2015),theyarestillunder-representedinseniormanagementrolesandontheboardsoftheUK’stopcompanies.SinceLordDavies’callforactionin2010,thenumberofwomeninnon-executiveboardroleshasincreasedmarkedly,thoughnotthenumberinexecutiveroles.

Between2010andOctober2015,therewasanincreaseinwomenontheboardsoftheUK’s350leadingcompanies(theFTSE350)from289to682–from9.5%to21.9%–andthenumberofall-maleboardsfellfrom152to15(DepartmentforBusiness,InnovationandSkills,2015).However,menstillheld2,434FTSE350directorrolesin2015(78%).

GenderimbalanceisjustonewayinwhichcompanyboardsfailtoreflectthediversityofBritishsociety.OftheFTSE100companies,62haveanall-Whiteboard(GreenParkInterimandExecutiveSearch,2015).Nodataiscollectedonthenumbersofdisabledboardmembers,oronothercharacteristicssuchasageorsexualorientation.

Inquiry focusInJuly2014,theCommissionlaunchedaninquiryintohowtheFTSE350,andtheexecutivesearchfirmstheyinstruct,recruitandselectpeopleforboarddirectorroles.Ouraimwastoidentifywhetherrecruitmentandselectionpracticesaretransparent,fairandresultinselectiononmerit,andtoidentifyareaswherecompaniesandtheiragentscouldmakeimprovementstosupportmorediverseappointmentstocompanyboards.

Weaskedcompaniesandexecutivesearchfirmstoprovideinformationaboutappointmentsmadeinthe12monthsprecedingthelaunchofourinquiry.ThishasenabledustoexaminehowwelltheappointmentsprocesshasusedtheprovisionsoftheEqualityAct2010andtherecommendationsintheFinancialReportingCouncil’s(FRC)UKCorporateGovernanceCode2toaddresstheunder-representationofwomenonboards(seeAnnex1forthetermsofreference).

TheCommissiondecidedtofocusontherecruitmentandselectionofwomenasawayofexaminingthebroaderissueofthelackofdiversityonboards.

1Basedonthepercentagesofwomenandmenaged16–64withahighereducationalqualificationorequivalent.

2See:https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf[accessed:16March2016]

18

The impact of board diversity IntheUK,companyboardsconsistofexecutiveandnon-executivedirectorswhosetandmonitorcorporatestrategyandperformance.Executivedirectorsleadoperationsanddeliverywithinthecompany.Non-executivedirectorsareindependentandexpectedtochallengetheexecutivedirectorsinaconstructiveway.Bothexecutiveandnon-executivedirectorshaveadutytoactinthebestinterestsofshareholders.

Diversityonboardsisnotsimplyanissueoffairness:researchsuggeststhatmorediverseboardsbringpositivebenefitstobusinesses.AnumberofstudiesshowanassociationbetweenthenumbersofwomenonFTSEboardsandimprovedfinancialperformance(DepartmentforBusiness,InnovationandSkills,2011;McKinsey&Company,2007).Thereisalsowidespreadagreementthatdiverseboardsreflectgoodcorporategovernanceandbetterdecisionmaking.TheUKCorporateGovernanceCoderecognisesthatdiversityenablesconstructivedialogueandchallenge,andpreventsthe‘groupthink’thathinderstheefficientoperationofabusiness(FRC,2014).Morediverseboardsalsoreflectcompanies’abilitytodrawfromthewidesttalentpoolintheirappointments(DepartmentforBusiness,InnovationandSkills,2011).

(FTSE 100 = 26.1%, FTSE 250 = 19.6%)

to 21.9%9.5%

Between 2010 and October 2015, the number of women on FTSE 350 boards increased from 289 to 682

19

Non-regulatory levers for change Giventheroleandsignificanceofboards,theyhavefrequentlycomeundercriticalscrutinybyGovernment.TheHiggsReview(Higgs,2003)andTysonReport(DepartmentofTradeandIndustry,2003)lookedatboardroomeffectiveness,therolesandresponsibilitiesofnon-executivedirectors,andtheirrecruitmentanddevelopment.Bothreportscalledforgreaterdiversityinnon-executivedirectors’backgrounds,skillsandexperiencetoenhancethevalueandefficacyofboardsbybringingawiderrangeofperspectivesandknowledgetobearoncompanyperformance,strategyandrisk.Thereportscalledformorediversityinthetalentpoolsfromwhichnon-executivedirectorswererecruited.Theynotedthatmostappointmentsweremadeinformally,usingpersonalcontacts,andthattoaccessamorediverserangeoftalent,organisationswouldhavetoimprovethetransparencyoftheappointmentprocess.Forthisreason,bothreportshighlightedtheroleexecutivesearchfirmscouldplay.

By2010,someEuropeancountrieswereintroducingquotastoimprovetheproportionofwomenonboards.TheUKGovernmentwasreluctanttogodownaregulatoryrouteandinvitedLordDaviesofAbersochtocarryoutareviewtoidentifyfactorspreventingmorewomenfrombecomingboardmembersandtodevelopastrategytoincreasetheirrepresentation.Hisreportsetout10recommendationstoaddressthegenderimbalance,includingsettingatargetfortheFTSE100toachieveaminimum25%representationofwomenonboardsby2015.Healsorecommendedthatcompaniesshould:

• disclosetheproportionofwomenontheirboards,seniormanagementteamsandacrosstheirorganisation,andreportonthis

• advertisenon-executivepositions,and

• enhancetheexecutivepipelinebydevelopingseniormembersofstaff.

Inaddition,heurgedtheexecutivesearchfirmsectortodevelopavoluntarycodeofconduct(DepartmentforBusiness,InnovationandSkills,2011).

LordDaviesextendedthetargettoachieveaminimum25%representationofwomentotheFTSE250in2013(DepartmentforBusiness,InnovationandSkills,2013).

InScotland,theSmithCommissionsetoutacommitmentin2014tointroducegenderquotasforpublicboardsaspartoffurtherdevolutionofpowerstotheScottishParliament.3 TheScottishGovernmentalsosetup‘PartnershipforChange’in2015toencourage

3TheSmithCommissionpublisheditsreportdetailingHeadsofAgreementonfurtherdevolutionofpowerstotheScottishParliament.Onceitpasses,theScotlandAct2016willenabletheScottishParliamenttolegislatetochangetheprocessofpublicappointmentstoincreasediversityonboards.

20

public,privateandthirdsectororganisationsinScotlandtocommittoachievingparitybetweenmenandwomenontheirboardsby2020.LiketheDaviesReview,thisisvoluntary.4

By2015,theFTSE100groupoverallhadmetthe25%targetandtheproportionofwomenontheboardsoftheFTSE250groupstoodat19.6%.Over80executivesearchfirmssigneduptoaVoluntaryCodeofConductin2011and17toanEnhancedVoluntaryCodein2014(DepartmentforBusiness,InnovationandSkills,2015).InOctober2015,LordDaviesincreasedthetargetforwomenonboardsto33%by2020fortheFTSE350companies.

LordDavies’workdemonstratesthesuccessofavoluntaryapproach,buthasalsoprompteddebateaboutthetransparencyoftheappointmentprocess.Ithighlightsthechallengesandbarrierstoopeningupboardrolestomorediversepotentialcandidatesandtodevelopingapipelineoffuturediversetalent.Italsoraisesquestionsabouttheuseoftargetsandwhethertheseruntheriskofbecomingthehighestnumberscompaniesaimtoreach,thatis,becomingfixedinto‘ceilings’.

‘Lord Davies’ work demonstrates the success of a voluntary approach, but has also prompted debate about the transparency of the appointment process.’

4See:http://onescotland.org/equality-themes/5050-by-2020/[accessed:1March2016]

21

The legal frameworkThelackofdiversityonboardsintheUKisproblematictoexplaingiventhestronglegalandregulatoryframeworksetoutintheEqualityAct2010andtheUKCorporateGovernanceCodetofacilitatefairnessandtransparency.

The Equality Act 2010providesprotectionfromdiscriminationonthegroundsofnine‘protectedcharacteristics’,5suchassex,raceanddisability.Thisincludesmakingitunlawfultodiscriminateagainstpeopleseekingemploymentorappointmentstopersonaloffice,suchasnon-executivedirectorshipsoncompanyboards.Companiesandtheiragentsmusttreatapplicantsfairlyandnotdiscriminateinanyarrangementsformakingappointments.TheEqualityAct2010allowstheuseofpositiveaction6toaddressunder-representationofwomeninseniormanagementandboardroles.

The UK Corporate Governance Code setscorporategovernancestandards. Ifcompaniesdonotcomplywiththestandards,theyarerequiredtoexplainwhy. TheCoderecommendsthattheappointmentprocessshouldbeformal,rigorousandtransparent,withappointmentsmade‘onmeritagainstobjectivecriteriaandwithdueregardforthebenefitsofdiversityontheboard,includinggender’(FRC,2014,p.11,B.2).Italsorecommendsthatthenominationcommittee,asub-committeeoftheboard,shouldleadtheprocessforboardappointmentsandmakerecommendationstotheboard. Itshouldevaluatethebalanceofskills,experience,knowledgeandindependenceontheboardasabasisforpreparingadescriptionoftheroleandcapabilitiesforaparticularappointmentandtoinformsuccessionplanning.

TheEqualityAct2010andUKCorporateGovernanceCodetogetherprovideaclearframeworkformerit-basedappointmentprocessesthatarelikelytogeneratemorediversecandidatepoolsandappointments.

5These‘protectedcharacteristics’are:age;disability;genderreassignment;race;religionorbelief;sex;sexualorientation;marriageandcivilpartnership;andpregnancyandmaternity.

6Positiveactionmeasuresmaybeusedatanystageofaselectionprocesstoencouragepeopleinprotectedgroupstoapplyforrolesortohelpthemgainskillsthatwillenablethemtocompeteonmeritonanequalfootingwithothers.Theaimistowidenthepoolofapplicantssothatanemployercanselectthebesttalent.The‘tie-breakprovision’isaspecificformofpositiveactionthatcanbeusedwheretherearetwoormorecandidateswhoareequallyqualifiedtoberecruitedorpromoted.Inthesecircumstances,apersonwithaparticularprotectedcharacteristiccanbeselectedifpeoplewhosharethatcharacteristicareunder-representedordisadvantaged.

Our approach OurinquirylookedathowwellcompanieshaveusedtheEqualityAct2010andtheUKCorporateGovernanceCodetoincreasegenderdiversitywhenmakingboardappointments.Weexaminedifcompaniesdemonstrateduseof:

• boardevaluationstoidentifyskills,experienceandknowledgerequirementsandtoassessthegenderbalance

• diversitypoliciesthatincludeaspirationaltargetsforincreasingthenumberofwomen atboardandseniormanagementlevel

• roledescriptionsthatidentifyrequiredskills,experience,knowledgeandpersonalqualities

• searchprocessesusingawiderangeofchannels,includingadvertising,toencourageapplicationsfromdiversecandidateswithrelevantskills,experienceandknowledge

• selection,interviewanddecision-makingprocessesthatallowforobjectiveassessmentofcandidates’skills,experience,knowledgeandpersonalqualities

• nominationcommitteesinleadingappointmentsandtheirawarenessofequalitylaw,and

• activitiestoimprovediversityinthetalentpipelineandtowidenthepoolofcandidatesforboardroles.

EachchapterofthisreportconsidersadifferentaspectoftheappointmentprocessandassessesourevidenceagainsttheprovisionsoftheUKCorporateGovernanceCodeandtheEqualityAct2010,andmakesrecommendationsforimprovements.

152 15

152 15

to

Between 2010 and October 2015 the number of all-male boards fell from 152 to 15.

However, men still held 2,434 FTSE 350 director roles in 2015 (78%).

22

23

Gathering evidenceDuringJanuarytoSeptember2015,wegatheredevidencetoinformourinquiry.WesurveyedallFTSE350companiesabouttheirboardappointmentactivitiesintheannualreportingperiod2012/13to2013/14and92%ofthosecompaniesresponded.Thisreducedthepossibilityofnon-responsebiastoaminimum.ThesurveythereforeprovidedastrongbasisformakingfindingsandrecommendationsontheappointmentspracticeofFTSE350companies.

Wealsosurveyed28executivesearchfirmsthatcarryoutboard-levelvacancysearchesforFTSEcompaniesandaresignatoriestotheVoluntaryCodeofConductand/ortheEnhancedVoluntaryCodeforexecutivesearchfirms.Weanalysedkeydocumentsfromrecruitmentprocessesandconductedinterviewswithcompanyandexecutivesearchfirmrepresentatives.Wealsointerviewedsuccessfulandunsuccessfulboardcandidates.

WeusedourevidencetocomparetheactivitiesofFTSE100andFTSE250companies.Wealsocomparedtheappointmentprocessesofcompanieswithnowomenontheirboardswiththoseofcompanieswith1-24%womenorwith25%ormorewomenontheirboards.FurtherdetailsofourresearchmethodologyaresetoutinAnnex2.

Aninquiryundersection16oftheEqualityAct2006isaformallegalprocess.TheCommissioncancompelrespondentstoprovideevidencetoaninquiry.Asmallnumberofcompaniesandexecutivesearchfirmschosenottoprovidetheevidencewerequested.Wedecidedonthisoccasionnottouseourpowerstocompelthemtodosoduetoresourceprioritisationconsiderationsandthehighdegreeofconfidenceintheresultsduetothehighresponserate.WehavelistedthosewhodidnotrespondinAnnex3.

24

‘‘As of October 2015, 137 FTSE 350 companies had reached or exceeded the 25% target, but 213 had not.’

25

Chapter 2: Boards’ performance on gender diversityWhenLordDaviesconcludedhisworkin2015,theFTSE100asagrouphadmetthetargetfor25%ofboardmemberstobewomenandtheFTSE250asagroupwascloseto20%.Yetthisoverallsuccessratehidesthevariabilityinperformance.AsofOctober2015,55FTSE100companieshadreachedorexceededthe25%target,but45hadnot.Moreover,82FTSE250companieshad25%ormorewomenontheirboards,but168hadnotmetthistarget(DepartmentforBusiness,InnovationandSkills,2015).

Ourdataexploresthereasonsforthesedifferencesinperformance.

Meeting the 25% target TherehasbeenagradualincreaseinthenumberofcompaniesintheFTSE350thathavemetorexceededthe25%target.However,byOctober2015,mostcompaniesstillfellbelowthe25%level.Figure2.1showsthisimprovementbyFTSE100andFTSE250companies.AcrosstheFTSE350,137(39%)companieshad25%womenormoreontheirboards,but213(61%)fellbelowthe25%markbyOctober2015(DepartmentforBusiness,InnovationandSkills,2015)(seeAnnex4,TableA2.1).

Figure 2.1:FTSEcompanieswith25%ormorewomenonboards

2012/130

50

100

150

200

Num

ber o

f com

pani

es

250

0

50

100

150

200

250FTSE100 FTSE250

82

168

61

157

3232

4155455867

5 5

3728

177

2013/14 Oct 2015(Davies Review)

2012/13 2013/14 Oct 2015(Davies Review)

Met 25% Not met 25% Non-response

Source:FTSEcompanysurvey(2012/13and2013/14)andOctober2015fromDavies(2015,p.34).

26

OnehundredandfiftyoftheFTSE350companies(47%)increasedtheproportionofwomenontheirboardinthereviewperiod,while46%ofcompaniesmaintainedordecreasedtheproportionofwomenontheirboard(seeAnnex4,TableA2.3).

Tounderstandthisfurtherweexploredwhathappenedwiththe150companiesthathadincreasedtheproportionofwomenontheirboardin2013/14.Figure2.2showsthat31%ofthesecompanies(46)didsobyreducingtheirboardsize,thatis,byreducingthenumberofmen,andnotbyappointingwomen.Thisisinkeepingwithatrendoverthepast10yearstoreduceboardsizetoimproveboardgovernance(LondonStockExchange,2012;Higgs,2003).Theremaining69%ofcompanies(104)increasedtheproportionofwomenontheirboardsbyappointingwomen,butjust38%ofcompanies(58)appointedwomenanddidnotreducetheirboardsize.

Figure 2.2:HowdidFTSE350boardsincreasetheproportionofwomen between2012/13and2013/14?

Womenappointedandreducedboardsize

Womenappointedwithnoboardsizereduction

Reducedboardsizeonly (nowomenappointed)31%

38%

31%

Source:FTSEcompanysurvey(2012/13and2013/14).

Base: 150FTSE350companiesthatincreasedthefemaleboardrepresentationbetween2012/13to2013/14.

27

Figure2.3showsthatprogressontacklingunder-representationhasbeenmetlargelythroughanincreaseinwomeninnon-executivedirectorroles.Ofthe138FTSE350com-paniesthatmadenon-executivedirectorappointments,100(73%)appointedatleastonefemalenon-executive.Ofthe30companiesthatmadeexecutivedirectorappointments,12(40%)appointedafemaleexecutivedirector(seeAnnex4,TableA2.2).

Figure 2.3:FTSE100andFTSE250companiesmakingappointmentsbetween2012/13and2013/14,andtheeffectonthenumberofwomenonboards(bynon-executivedirectorsandexecutivedirectors)


Notes: NED=non-executivedirector,ED=executivedirector.

Base: 150FTSE350companiesthatincreasedthefemaleboardrepresentationbetween2012/13to2013/14.

0

10

20

30

40

50

60

70

80

90

Num

ber o

f FTS

E co

mpa

nies

NED appointments ED appointments

FTSE 100 FTSE 250 FTSE 100 FTSE 250

Didn’t increase women on board

Increased womenon board

15

36

24

63

1177

5

28

Figure2.4showsthatnearlyallFTSE100companieshadatleastonefemalenon-executivedirector,butnearlythree-quartershadnofemaleexecutivedirectorsin2013/14.Figure2.5showsthatalmost90%ofFTSE250companieshadatleastonefemalenon-executivedirector,butnofemaleexecutivedirectors.Thisdemonstratesthatcompaniesfacesignificantchallengesindevelopingapipelineofwomenwhoarereadyforexecutivedirectorroles.

Figure 2.4:Proportionofwomeninexecutiveandnon-executivedirectorrolesin FTSE100companiesin2013/14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of responding FTSE 100 companies

Executive director

Non-executive director

24%74% 2%

2%97%1%

0 women 1 or more women Unknown

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Executive director


10%87% 3%

1%86%12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Executive director


24%74% 2%

2%97%1%


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Executive director


10%87% 3%

1%86%12%

Source:FTSEcompanysurvey(2013/14).

Base: FTSE100companies=95companiesthatrespondedtotheinquirysurvey.

Our data: between 2012/13 and 2013/14Of the 150 companies that improved the representation

of women on their boards

31% 38% 31%had done so by reducing

their board sizeby making a female

appointmentby making a female

appointment and reducing board size

29


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Executive director


24%74% 2%

2%97%1%


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Executive director


10%87% 3%

1%86%12%



30

Weusedourdatatoidentifyhowmanyboardroleswereheldbywomenormenrelativetoboardsize.Inoursampletheaverageboardsizewas9.2(seeAnnex4,FigureA2.1).Figure2.6showsthatof308companiesthatprovideduswithsufficientdatafor2013/14,24(8%)hadnowomenontheirboardand242(79%)hadtwowomenorfewer.6%ofcompanieshavemorethanthreewomen,but96%havemorethanthreemenontheirboards.JustsevenFTSE350boardshavefivefemalemembers,buttheseboardsrangeinsizefrom11to18soallhaveamalemajority.

Figure 2.6:Numberofmenandwomenholdingexecutiveornon-executivedirectorrolesonFTSE350boardsin2013/14

Women on boards Men on boards

00

24

0

100

0

118

0 0

47

512

7

17

31

65

0

64

0

51

0

33

0

18

06

08

05

0 2 0 1 0 29 9

Number (of men or women) on each company board (combined NED/ED)

20

40

60

80

100

120

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 >15

Not

Kno

wn

No.

of F

TSE

350

boar

ds

• 91%ofcompanieshavethreeorfewerwomenontheirboards

• <2%ofcompanieshavethreeorfewermenontheirboards

• 6%ofcompanieshavemorethanthreewomenontheirboards

• 96%ofcompaniesmorethanthreemenontheirboards

Source:FTSEcompanysurvey(2013/14)

Notes: NED=non-executivedirector,ED=executivedirector.


31

DespitesomeimprovementintheabsolutenumberofwomenonFTSE350boards,theseboardsremainoverwhelminglymale.Althoughthenumberofwomenholdingnon-executiveorexecutiverolesincreasedfrom461in2013to682by2015,andthenumberofmenfellfrom2,674to2,434,menremainedinthesignificantmajority(DepartmentforBusiness,InnovationandSkills,2015).

Conclusions WhiletheFTSE350overallhaveimprovedtherepresentationofwomenontheirboardsoverthepastfiveyears,thereisconsiderablevariationamongcompanies.Moststillhavenotmetthe25%targetintroducedbytheDaviesReview.Whereimprovementshavebeenmade,thishasbeenasmuchduetoreductionsinboardsizeasithastoappointmentsofwomen.Theimprovementhasalsobeenlargelyinnon-executiveratherthanexecutiveappointments,showingthechallengescompaniesfaceindevelopingapipelineoffuturewomenleaders.Progresshasbeentooslowandthereismuchworkstilltobedonetoimprovethenumbersofwomenonboards,withtheaddedbenefitsthiswillbringtocompanies.

32

‘Company board evaluations should consider the balance of skills, experience and knowledge of board directors, the diversity of the board, how the board works together as a unit.’

Chapter 3: Board evaluations TheUKCorporateGovernanceCoderecommendsthatcompanyboardevaluationsshouldconsiderthebalanceofskills,experienceandknowledgeofboarddirectors,thediversityoftheboard,howtheboardworkstogetherasaunit,andotherfactorsthatwillsupportboardeffectiveness.Assuch,evaluationsofboardeffectivenessareanimportantfirststepintheboardappointmentprocessandforsuccessionplanning.Companiesshouldundertakeaninternalboardevaluationannuallyandanevaluationconductedbyanexternalpartyeverythreeyears(FRC,2014,pp.11and14,B.2.2andB.6).

Weassessedwhethercompanieshadcarriedoutboardevaluationsthatidentifiedskillandknowledgegapsandanalysedthebalanceofmenandwomenontheboard.

Approaches to board evaluation Ourdatashowthat62%ofcompanieshadcarriedoutanevaluationofboardeffectiveness,whichincludedtakingintoaccountthegendercompositionoftheboard.TherewaslittledifferencebetweenFTSE100andFTSE250companies(Annex4,TableA3.1).38%ofcompaniesreportednotcarryingoutaboardevaluation.Figure3.1showsthattheseweremorelikelytobecompanieswith25%ormore,or1-24%,womenontheirboardsthannowomen(41%,38%and25%respectively).Thissuggeststhatonceboardshavemetthe25%targetorareclosetodoingso,theymaystopconsideringtheirgendercompositionandwhatadesirabletargetfortheirparticularcompanywouldbe.

had carried out an evaluation of board eff ectiveness which included

taking into account the gender composition of the board

did not consider the composition of their boards within evaluations

62% of FTSE 350 companies

38% of FTSE 350 companies

33

Figure 3.1:Companiesthathaveevaluatedboardeffectivenessincludingmale/femalecomposition,byproportionofwomenonboards

Yes No

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of organisations

1-24% female board representation

≥ 25% female board representation

All respondents

0% female board representation

62.2% 37.8%

58.6% 41.4%

62.1% 37.9%

25%75%

Source:FTSEinquirydatabasedonresponsestosurvey(2013/14period).TheparticularquestionaskedwasQ27:Hasyourcompanycarriedoutanevaluationofboardeffectivenessthattakesintoaccountthegendercompositionoftheboard?

Base: Allrespondents=317,≥25%femaleboardrepresentation=99,1-24%femaleboardrepresentation=188,0%femaleboardrepresentation=24,unknownfemaleboardrepresentation=6(excludedfromchart).

Wefoundthat82%ofcompanieshadundertakenaboardskillsauditwhenconsideringboardappointments,withlittlevariationbetweentheFTSE100andFTSE250(seeAnnex4,TableA3.2).

Interviewswithcompanychairsandotherrepresentativesshowedthatviewsdifferedaboutthebenefitsofboardevaluations.Acompanychair,whohadexperiencednumerousexternally-facilitatedboardevaluations,statedthattheyare‘areallygoodidea,becauseifwetryanddoitourselves…youtendtopatyourselfontheback.’(Chair,FTSE250,1-24%femaleboardrepresentation,male,interviewresponse).

34

Onenominationcommitteeandcompanychairwaslesspositiveabouttheirimpactandlabelledtheinternalannualreviewas‘mostlylipservice’andtheexternally-facilitatedboardevaluationas‘useless’.Thechairfeltthatthecompany‘neverreallygetsanythingoutof’theprocess,butconcludedthatevaluationswere‘sometimesusefulonlyatthelevelofconfirmingthatoneislookingatthingsintherightwayalready.’(Chairoftheboardandnominationcommittee,FTSE250,≥25%femaleboardrepresentation,male,interviewresponse).

Somecompaniesreportedthattheydidnotuseboardevaluationstoassesswhetherdiversitywassignificantforsuccessionplanning:

‘The board effectiveness evaluation was generally reviewed in relation to succession planning. Diversity was not highlighted as an issue. Specifications for board appointments are open with no positive bias and appointments are made on merit.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse).

35

‘Some companies reported that they did not use board evaluations to assess whether diversity was significant for succession planning.’

36

Benefits of board evaluations Aspartoftheskillsandexperienceaudit,twocompanieswithahighproportionofwomenontheirboardsprovidedexamplesofpurposefulandeffectiveevaluationsthatassessedtheboard’sdiversity:

‘The company maintains a matrix covering the skills that the individual board members bring to the table, including commercial sector-specific skills, regulatory skills, government or political skills and experience … over their career, public, private, other, and we do a third dimension – we look at their diversity in terms of their gender but also in terms of their geographic origin, trying to map that against what we see as being our priorities in the delivery of group strategy.’

(Groupcompanysecretary,FTSE100,≥25%femaleboardrepresentation,male,interviewresponse)

‘The most recent report by an external provider noted the need to increase the gender diversity of the board.’

(FTSE250,0%femaleboardrepresentation,surveyresponse)

Othercompaniesreportedthattheboardevaluationtheyhadundertakenhadidentifieditslackofdiversity:

‘[Our model] is a way of regularly reviewing the composition of the board to ensure that we’re achieving best practice with regards to diversity and skill set. [There are] eight main factors … age, … gender, … nationality, …professional background, … ethnic group, … independent and non-independent, … executive, non-executive, and finally, … tenure’.

(Chair,FTSE250,≥25%female boardrepresentation,female, interviewresponse)

‘The 2013 board evaluation exercise revealed a general consensus of the need to increase diversity particularly in terms of female and international perspectives.’

(FTSE100,1-24%femaleboardrepresentation,surveyresponse)

37

Conclusions Mostcompanieshadevaluatedtheirboardsandconsideredthecompositionofmen andwomen.However,around40%hadnotassessedgenderbalanceintheirevaluationsofboardeffectiveness.Mostcompanieshadundertakenaskillsaudit,butaround20%had not.

Companiesweredividedaboutthebenefitsofundertakingboardeffectivenessevaluations.Someusedtheevaluationtoreflectonthecompositionoftheircurrentboardandwhethertheyneededtotakeactiontoimprovewomen’srepresentation,sometimesinlightoftheirdiversitytargets.Othercompaniesdidnotconsidergenderbalanceintheirevaluationastheyfelttheselectionprocesswasopentoall.

Werecommendcompaniestakethefollowingactiontoimprovediversityontheirboards:

• Useaboardevaluationtoassessthebalanceofskills,experienceandknowledgeontheboardandtoobtaininformationaboutthediversitycompositionoftheboard.

38

‘Setting aspirational targets for increasing the proportion of an under-represented group in a specified timescale can be a form of positive action permitted by the Act.’

Chapter 4: Diversity policies and targets Acompany’sboardevaluationmayidentifythatwomenareunder-representedontheboard,atseniormanagementlevelsorthroughoutthecompany.Tohelpsetadirectionandmonitorprogress,aboardmaydevelopadiversitypolicyandsetaspirationaltargetsforitself,seniormanagement,andthecompany’sworkforcetoimprovetheproportionofwomenoveraspecifiedtimescale.

TheUKCorporateGovernanceCoderecommendsthatcompaniesdescribetheirdiversitypolicy,anymeasurableobjectivesforimplementingthepolicyandprogressonachievingtheseobjectivesintheirannualreports(FRC,2014,p.12,B.2.4).AsoutlinedinChapter1,theEqualityAct2010allowsemployerstoundertakepositiveaction.Settingaspirationaltargetsforincreasingtheproportionofanunder-representedgroupinaspecifiedtimescalecanbeaformofpositiveactionpermittedbytheAct.

Weassessedwhethercompanieshaddiversitypoliciesandwhethertheseincludedtargetsorobjectivesforincreasingthenumberofwomenatboardandseniormanagementlevels.Wealsolookedattheimpactofsuchtargets.

Board diversity policiesMostFTSE350companies(76%)reportedhavingapolicyonboardroomdiversity.TherewaslittledifferencebetweenFTSE100andFTSE250companies,orbetweencompaniesanalysedbytheproportionofwomenontheirboards.Wherecompanieshaddiversitypolicies,94%oftheFTSE350explicitlymentionedgender,withlittlevariationbetweentheFTSE100andFTSE250orbyproportionofwomenontheboard(seeAnnex4,TableA4.1).

TwocompaniesthathadgenderdiversitypoliciestoldusthattheyhadintroducedtheseasaresultoftheDaviesReviewrecommendationsandtheirperceptionthatitwasimportanttopubliclysupportthisagenda.Onecompanysaidthatitsboardroomdiversitypolicywas‘importantreputationally’andwaskeyto‘givingvisibility,bothinternallyandexternally,totheachievementofa[balanced]anddiverseboard’(Groupcompanysecretary,FTSE100,≥25%femaleboardrepresentation,male,interviewresponse).

39

Theothercompanysaidthatadiversitypolicydemonstratedtheircommitmenttoaboardthathas‘therightsortofrepresentation’foraworkforcewith‘aprettyhighfemalecontent’(Chairofboard/nominationcommittee,FTSE100,≥25%femaleboardrepresentation,male,interviewresponse).

24%ofcompaniesdidnothaveaboarddiversitypolicy,withlittledifferencebetweenFTSE100andFTSE250companiesorbyproportionofwomenontheirboards.Companieswithoutadiversitypolicyweremostlikelytoexplainthisbysayingthattheysetouttheircommitmenttodiversityintheirannualreportorthattheymadeappointmentsbasedonmerit.

Board diversity targetsTheintentionofsettinganaspirationaldiversitytargetistoprovideacompanywithacleargoaltoworktowardandagainstwhichtomeasureitsprogress.

Evenwherecompanieshadboarddiversitypolicies,theseusuallydidnottranslateintotargetsorobjectives.Figure4.1showsthatjust38%ofcompanieswithadiversitypolicyalsohadgenderdiversitytargets,andthiswasmorelikelyamongFTSE100thanFTSE250companies(48%and35%respectively).ThismayreflecttheimpactofearlierfocusontheFTSE100followingtheDaviesReviewin2011.Figure4.2showscompanieswithnowomenontheirboardsweremorelikelytohavegendertargetsthancompanieswith1-24%or25%ormorewomenontheirboards(44%,35%and42%respectively).Thistoomayreflecttheconsiderablepublicscrutinyoncompanieswithoutwomenontheirboardsandtheirefforttouseatargettodriveimprovement.

40

Mostcompanieswithaboardroomdiversitypolicy(62%)hadnotsetgenderdiversitytargetsorobjectives.Themostcommonlycitedreasonwasthattheybelievedsettingtargetswouldunderminetheirintentiontoappointonmerit.Forexample,companiesstated:

‘Given our commitment to appointing the best people and ensuring that all employees have an equal chance of developing their careers within the Group we do not think it is appropriate to set targets for board appointment.’ (FTSE250,≥25%femaleboardrepresentation,surveyresponse)

‘The company’s policy is to make appointments on merit and for this reason the setting of specific, measurable targets is not considered to be appropriate.’ (FTSE250,0%femaleboardrepresentation,surveyresponse)

41

Figure 4.1:Companieswithaboarddiversitypolicythatincludesagenderobjectiveortarget,byFTSE100andFTSE250companies

Yes - includes objectives or targets for gender diversity

No - does not include objectives or targets for gender diversity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of FTSE companies with board diversity policy

FTSE 100

All

FTSE 250

47.9% 52.1%

38.2% 61.8%

65.5%34.5%

42


Notes:TheparticularquestionsaskedwereQ6:Doesyourcompanyhaveapolicyonboardroomdiversity?andQ10:Doesyourcompany’spolicyonboardroomdiversityincludeobjectivesortargetsforgenderdiversityintheboardroom?

Base: Allrespondents=317,FTSE100=95,FTSE250=218.

Figure 4.2:Companieswithaboarddiversitypolicythatincludesagenderobjectiveortarget,byproportionofwomenontheboard

Yes - includes objectives or targets for gender diversity

No - does not include objectives or targets for gender diversity

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


1-24% FBR

≥25% FBR

0% FBR

35.1% 64.9%

41.9% 58.1%

All 38.2% 61.8%

55.6%44.4%

43


Notes:TheparticularquestionsaskedwereQ6:Doesyourcompanyhaveapolicyonboardroomdiversity?andQ10:Doesyourcompany’spolicyonboardroomdiversityincludeobjectivesortargetsforgenderdiversityintheboardroom?

FBR=femaleboardrepresentation.

Base: Allrespondents=246,≥25%FBR=74,1-24%FBR=151,0%FBR=18,unknownFBR=3(excludedfromchart).

Diversity policies and targets for senior management teamsOurdatashowedthatmenoutnumberwomeninseniorpositionsintheFTSE350byaratioofapproximately4:1.In2013/14,227oftheFTSE350reportedthattheyemployed1,440womenand4,476meninseniormanagementorexecutivecommitteepositions.7

Thisshowsthatcompaniesfaceaconsiderablechallengetoimprovetheproportionofwomenintheirtalentpipeline,andultimatelytheproportionofwomeninexecutivedirectorboardroles.

Almosthalfofcompanies(47%)haddiversitypoliciesonthecompositionoftheirseniormanagementteams,whichis30%lessthanthosewithboardroomdiversitypolicies(seeFigure4.3andAnnex4,TableA4.3).FTSE100companiesweremorelikelythanFTSE250companiestohaveapolicy(57%and42%respectively).Companieswith25%ormoreand1-24%ofwomenontheirboardsweremorelikelytohaveapolicytoincreasediversityintheirseniormanagementandexecutivecommitteesthancompanieswithnowomenontheirboards(53%,44%and35%respectively)(seeAnnex4,TableA.4.3).ThismayagainreflecttheimpactofearlypublicscrutinyonFTSE100boardsfollowingtheDaviesReviewin2011,andcompanies’realisationthattheyshouldtrytoimprovetheproportionofwomenintheirexecutivedirectorpipeline.

44

7Ourdatacovers227oftheFTSE350companies.Investmenttrustsdidnotprovidedatabecausetheydonothaveanexecutive/seniormanagementstructure.Theinvestmenttrustmanagerisaccountabletoaboardofnon-executivedirectors.

Men outnumber women women in

senior management/executive positions

by a ratio of approximately 4:1

Figure 4.3:Companieswithaseniormanagementdiversitypolicy,byFTSE100andFTSE250

Yes - have policy to increase diversity ar senior management/executive level

No - do not have policy to increase diversity at senior management/executive level

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


FTSE 100

All

FTSE 250

56.8% 43.2%

46.5% 53.3%

58.4%41.6%

45


Notes:TheparticularquestionaskedwasQ17:Doesyourcompanyhaveapolicytoincreasediversityatseniormanagement/executivelevel?Investmentsectorexcludedastherewerenoseniormanagementpositions.

Base: Allrespondents=284,FTSE100=95,FTSE250=185.

Companies in the FTSE 100 were more likely

to have a diversity policy for their senior

management team than in the FTSE 250

57% 42%

FTSE 100 FTSE 250

Ofthecompanieswithaseniormanagementdiversitypolicy,only38%hadsetgenderdiversitytargets.Figure4.4showsthatmoreFTSE100thanFTSE250companieshavegendertargetsforseniormanagement(46%and32%respectively).Figure4.5showsthathalfofcompanieswith25%ormorewomenornowomenontheirboardshavediversitytargets,asdo30%ofcompanieswith1-24%femaleboardrepresentation.

Figure 4.4:Companieswithaseniormanagementdiversitypolicyandagenderobjectiveortarget,byFTSE100andFTSE250

46

Yes - policy has gender target/objective

No - policy does not have gender target/objectives

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of organisations with senior management diversity policy

FTSE 100

All

FTSE 250

46.4% 53.6%

37.8% 62.2%

67.9%32.1%


Notes:TheparticularquestionsaskedwereQ17:Doesyourcompanyhaveapolicytoincreasediversityatseniormanagement/executivelevel?andQ21:Doesyourcompany’spolicytoincreasediversityatseniormanagement/executivelevelincludeobjectivesortargetsforgender? Investmentsectorexcludedastherewerenoseniormanagementpositions.

Base: RespondentstoQ17(thathaveaseniormanagementpolicy)=132,FTSE100=54,FTSE250=77.

47

Figure 4.5:Companieswithaseniormanagementdiversitypolicyandagenderobjectiveortarget,byproportionofwomenontheboard

Yes - policy has gender target/objective

No - policy does not have gender target/objectives

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of organisations with senior management diversity policy

1-24% FBR

≥25% FBR

All

0% FBR

30% 70%

50% 50%

37.8% 62.2%

50%50%


Notes:TheparticularquestionsaskedwereQ17:Doesyourcompanyhaveapolicytoincreasediversityatseniormanagement/executivelevel?andQ21:Doesyourcompany’spolicytoincreasediversityatseniormanagement/executivelevelincludeobjectivesortargetsforgender? FBR=femaleboardrepresentation. Investmentsectorexcludedastherewerenoseniormanagementpositions.

Base: Allrespondents=135,≥25%FBR=46,1-24%FBR=80,0%FBR=6,unknownFBR=3(excludedfromchart).

Themostfrequentreasonsgivenbycompaniesfornotsettingseniormanagementgendertargetswerethattargetswereincompatiblewithrecruitmentonmeritandagendertargetmightmeantreatingpeoplewithotherprotectedcharacteristicslessfavourably.Forexample:

‘We agree that there are benefi ts to having women represented across all management levels but do not believe that targets or quotas would be appropriate for increasing representation. We recruit on the basis of merit and qualifi cation alone.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

48

10%Just 8 of 76 companies (10%) had targets of over 25% (usually 30% or 33%).

45%Yet 21 of the 47 (45%) companies with a 25% target had already met this in 2013/14

Do targets make a difference? Impact on boards across the FTSE 350 sector

The25%targetsetbytheDaviesReviewin2011hashelpedtoimprovetheproportionofwomenonFTSE350boardsasawhole.Ourevidencesuggeststhatapubliclyvisiblesectortargetdrivescompanyperformancetomeetit,andmostcompanieschosetosetthe25%targetratherthanonethatmightreflecttheirparticularcircumstances(seeAnnex4,TableA4.2).Of76companiesthatprovidedinformationabouttheirboardtarget,62%(47)settheirtargetat25%inlinewiththeDaviesReviewrecommendationandthiswasmorecommonamongFTSE100thanFTSE250companies,reflectingtheinitialfocusofpublicscrutinyontheFTSE100.

Forsomecompaniesthetargetof25%wasstilloutofreach.Of76companies,27%(21)hadatargetoflessthan25%andthiswasmorecommoninFTSE250thanFTSE100companies.Ourdataalsoshowedthatcompanieswithnowomenontheirboardsweremorelikelytohaveagenderdiversitypolicywithtargetsthanthosewithwomenontheirboards,suggestingthattargetshelpedfocusboardattentiononnecessarychange–evenwherethepressurewasexternallydriven.

Ourevidencealsosuggeststhatsectortargetsmightlimittheambitionofcompaniesthatarealreadyclosetoreaching25%.Just8of76companies(10%)hadtargetsofover25%(usually30%or33%),yet21ofthe47companies(45%)witha25%targethadalreadymetthisin2013/14.Whenaskedaboutthechoiceoftheirtarget,companiesdescribed‘maintaining25%’or‘compliancewiththeDaviesReview’,8suggestingmostwerehappytosettleforthisratherthansettinganaspirationaltargetonarealisticassessmentofwhatcanbeachieved.

Thus,voluntarytargetsforasectorcanhaveapositiveimpactinencouragingimprovement.However,theymayactasa‘ceiling’forfurtherprogressandlimittheambitionofcompaniesthathavealreadymetit.Thereisalsoariskthattargetsmaydriveunlawfulbehaviour,suchasrecruitmentbasedontheprotectedcharacteristicsofcandidates(seeChapter6),ormaynotreflectarealisticexpectationofwhatcanbeachieved.

49

8Basedonopen-endedresponsestoQ13:Whatisyourcompany’sboardroomgenderdiversitytarget/objective?

Conclusions Policiesandtargetshelpcompaniestorecruitmorewomenbyidentifyingtheobstaclesimpedingtheirprogress,wideningthepoolofapplicantsandmakingthetalentpipelinemorediverse.Targetsalsoallowcompaniestomeasuretheirprogress,reviewwhenfurtheractionisneeded,oracknowledgewhenaninterventionhasbeensuccessful.

Ourevidencesuggeststhatmostcompanieshavediversitypoliciesatboardlevelandhalfatseniormanagementlevel,butthemajoritydonottranslatetheseintointernaltargetstoimprovetheproportionofwomen.Nevertheless,sectortargetssetbytheDaviesReviewhavehadapositiveimpactinencouragingboarddiversityandthishaspossiblyresultedinatrickle-downeffectintalentpipelines.Somecompaniesbelievedtargetsundermineappointmentsonmerit;thissuggestsalackofunderstandingofpositiveaction.

Werecommendthatcompaniestakethefollowingactionstopromoteboardandseniormanagementdiversity:

• useinformationaboutunder-representationtocreateadiversitypolicyfortheboardandseniormanagement,whichincludesaspirationaltargetsuniquetothecompany

• makesuretargetsreflectrealisticexpectationsofwhatcanbeachievedanddonotresultinpressuretotakepotentiallyunlawfulsteps,and

• reportannuallyonprogressinmeetingtargets.

50

9Theexceptionwouldbewherehavingaparticularprotectedcharacteristicisagenuinerequirement ofthejob(anoccupationalrequirement)andtherequirementisaproportionatemeansofachievinga legitimateaim.

Chapter 5: Role descriptions Theroledescriptiondefinestheskillsandqualitiesaboardbelievesitneedsforaparticulardirectorappointmentandsetsthecriteriaforassessingcandidatesonmerit.Thesecriteriashouldbeobjective,relevantandunrelatedtotheprotectedcharacteristicsundertheEqualityAct2010,suchassex,raceanddisability(seeChapter1forafulllist).

TheUKCorporateGovernanceCodetasksthenominationcommitteewithpreparingadescriptionoftheroleandcapabilitiesforaparticularboardappointmentbasedontheboardevaluation(FRC,2014,p.11,B.2.2).TheEqualityAct2010requiresthatemployersdonotdiscriminatewhenmakingappointments.Thismeansthatanemployercannotrequireapersontohaveaparticularprotectedcharacteristic(exceptinveryspecificcircumstances).9Jobdescriptionsandroleprofilesmustnotcontainrequirementsthatareanunjustifiablebarriertoapplicationforpeoplewithcertainprotectedcharacteristics,andrecruitersmustnotmakeassumptionsaboutwhethersomeonewouldfitinwiththeexistingworkforcebecausetheyhaveaparticularprotectedcharacteristic.

Weassessedwhethercompanieshadpreparedaroledescriptionthatsetoutthespecificrequirementsforaboardroleandidentifiedrelevantskillsthatwereobjective,necessaryandjustifiable.Wefocusedonnon-executivedirectorroledescriptions.

51

10Executivedirectorshaveastrategicandoperationalroleand,asaresult,theirroledescriptionscontainspecificcoreskills.Theseincludeexperienceofdifferentbusinessfunctions,sector-relatedskillsandtechnicalknowledge,andfinanceandprofitandlossexperience.Non-executivedirectorsprovidestrategicoversightandguidancetothecompany.Aswellassectororbusinessexpertise,non-executivedirectorsalsorequireawiderangeofgenericskillsthatallowthemtoplaythisroleeffectively,suchasgoodcommunicationandtheabilitytochallenge,knowledgeofcorporategovernanceandstrategicinsight.

Analysis of skills requirements of non-executive role descriptionsCompaniesreportedthattheyusedinformationfromboardevaluationsandsuccessionplanningtoinformtherequirementsforeachdirectorrole,asrecommendedbytheUKCorporateGovernanceCode.

Companiesandexecutivesearchfirmsdescribeddifferentskillsrequirementsforexecutiveandnon-executivedirectorrolesandsuggestedthatnon-executiveroles,whichrelyonawiderangeofgenericskills,werelikelytooffermorescopetowidenthecandidatepool.10

Weanalysednon-executiveroledescriptionsprovidedby25companiestoassesshowthesedescribedskills,knowledge,experienceandpersonalqualitiesfornon-executivedirectorroles.Weexcludedanychairorchairofcommitteeroleswhereadditionaltechnicalskillswouldberequired,forexample,fortheauditorremunerationcommittees.

52

requiredpreviousFTSEboardexperienceasanon-executiveorexecutivedirector,

We analysed non-executive role descriptions provided by 25 companies to assess how these described skills, experience and

capabilities for non-executive director roles.

requiredpeopleofaparticularsexorage,

52% 40%required‘culturalfit/chemistry’

28%

Table 5.1:Mostcommonskilldescriptionsinnon-executiveroledescriptions

Table5.1showsthatthemostcommonlyrequiredskillsfornon-executivedirectorswereforgeneric‘businessexperience’andpreviousexperienceasanon-executiveorexecutivedirector.Thiswasfollowedbyroleorsector-specificskills,suchasrequirementsfor‘finance’,‘commercial’or‘PLC’experience.Over50%ofdocumentsusedtheseterms.

Over40%ofthedocumentsrequiredpeopleofaparticularsexorageand28%required‘culturalfit/chemistry’or‘interpersonalskills’.Otherlessfrequentlymentionedrequirementswereforpersonalitytraitssuchas‘gravitas’,‘stature’,‘lowego’,‘trustworthiness’and‘goodsenseofhumour’,andforcommunicationandinfluencingskills.

Number of occurrences in documents

39

19

14

13

12

9

9

8

Number of documents using this terminology

16

13

9

11

10

8

7

7

% of companies using term

64%

52%

36%

44%

40%

32%

28%

28%

Words/phrases

Business experience

Previous experience in board role – NED/ED

Finance experience/financial management

Commerce/commercial experience

Woman/age criteria requirement

PLC experience

Cultural fit/chemistry

Interpersonal skills

53

Source:Non-executivedirectorroledescriptionsanalysis(2013/14).

Notes:Tablerestrictedtoterminologyusedbymorethan25%ofcompaniesinthesample.NED=non-executivedirector,ED=executivedirector

Base: 25FTSEcompanies,eachprovidingadocument(25documentscontaining36non-executivedirectorroles).Non-executivedirectorrolesthatincludedadditionalchairingrequirementswereexcluded.

Requirements for people with specific protected characteristicsAroledescriptionthatrequiresapplicantstobemaleorfemale,orofaparticularage,isalmostalwaysdirectlydiscriminatoryandunlawfulundertheEqualityAct2010.Suchrequirementsexcludesuitablyqualifiedindividualsfromapplyingfortheserolesbecausetheydonothavetherequiredprotectedcharacteristic.

Ouranalysisfoundthat10of25documentsspecifiedapreferenceforacandidateofaparticularageorsex.Forexample:

‘There is currently only one female director who is non-executive and [the company] would like to appoint an additional female non-executive director.’ (FTSE250,≥25%femaleboardrepresentation,roledescription)

‘All the candidates are likely to be between their late forties and very early sixties.’ (FTSE250,≥25%femaleboardrepresentation,roledescription)

54

Requirements for previous board experienceIfarequirementinajobdescriptionparticularlydisadvantageswomenasagroup,itwillonlybelawfulifitisaproportionatewayofmeetingalegitimateaim.

Ouranalysisfoundthat13outof25documentsidentifiedapreferenceforpreviousboardexperienceintheirnon-executivedirectorroledescriptions.Forexample:

‘Previous plc main board experience as an independent director a must.’ (FTSE250,≥25%femaleboardrepresentation,roledescription)

Executivesearchfirmstoldusthatcompaniesfavouredcandidateswithpreviousnon-executiveorespeciallyexecutiveboardexperienceinFTSE350companies(andsometimesexplicitlyFTSE100companies).Theysaidthatcompaniesviewedcandidateswithoutpreviousboardexperienceas‘agamble’or‘risky’.Similarly,businessorganisations11saidtherequirementforpreviousFTSEexperiencegavecompaniesassurancethatappointeeshadtheappropriateskillstomeettherequirementsofregulatorybodies.12

55

11TheCommissionhostedroundtablesessionstoshareanddiscussevidenceandemergingfindingsfromtheinquirywithrepresentativesofleadingbusinessorganisations.

12Inthebankingsector,thePrudentialRegulatoryAuthorityandFinancialConductAuthorityapprovenon-executivedirectorappointeesfortherolesofboardchairman,seniorindependentdirectorandchairsoftherisk,audit,remunerationandnominationcommittees.

Someroledescriptionsindicatedapreference,butnotanexplicitrequirement,forpreviousboardexperienceorstatedthatacompanywouldconsidercandidateswithoutboardexperiencewherethisalreadyexistedontheboard.Forexample:

‘Prior plc board experience or non-executive experience is not a prerequisite.’ (FTSE250,≥25%femaleboardrepresentation,roledescription)

‘As the current non-executive directors were all experienced at working with listed companies, the company would consider candidates who had little plc board experience providing they had the appropriate skills.’ (FTSE250,1-24%femaleboardrepresentation,roledescription)

However,thismoreflexibleapproachwastheexceptionandpreviousboardexperienceseemstobeakeydeterminantofsuccessinattaininganon-executiverole.Researchshowsthatin2014,60%ofallnon-executivedirectorpositionswenttoindividualswhohadalreadyheldeithernon-executiveorexecutivedirectorrolesinlistedcompanies(KornFerryInstitute,2015).

Arequirementthatappointeeshaveknowledgeofcorporategovernance,regulatoryrequirements,shareholderrelationshipsandexperienceofmanagingorganisationsthatarefinanciallyandorganisationallycomplexclearlyfulfilsalegitimateaim.PreviousmembershipofaFTSEboardcouldbeonewayofdemonstratingthatrequirementismet.However,aswomenareunder-representedonFTSE350boards,theyarelesslikelyasagrouptohavethatexperiencethanmen.MakingpreviousFTSEboardmembershiptheonlywayofdemonstratingthattherequirementismetwillbeunlawfulindirectdiscrimination,unlessinrelationtotheparticularroleitisaproportionatemeansofachievingalegitimateaim.ThismeansthatacompanywouldneedtodemonstratethattherolerequiredskillsorcompetencieswhichcouldonlybegainedthroughpreviousFTSEboardexperience.

Bydefiningthespecificknowledge,skillsandexperiencerequiredfortherole,suchasknowledgeofcorporategovernanceandshareholderrelationships,ratherthananarrowrequirementforpreviousFTSEexperience,companiesmaybeabletowidenthepoolofapplicantswhocandemonstratetherequirementsindifferentways.

56

Chemistry and fitRoledescriptionsthatrelyonundefined,poorlydefinedorsubjectivecriteriamaydisadvantagefemalecandidatesintheselectionprocess,asthesecriteriamaygiverisetounquestionedassumptionsandjudgementsaboutwomen’scapabilities.

Ouranalysisshowedthatsevenoutof25documentsidentifiedculturalfitorchemistryintheirnon-executivedirectorrolerequirements.Mostcompaniesinterpretedchemistryandfitaspersonalityandculturalsimilaritytotheexistingboardmembers.Thesurveyprovidedmanyexamplesofthisapproach.Forexample,companiessaidthatwhentheyassessedshortlistedcandidateswhohadtherightskills,theirdecisionsthenwerebasedonthefollowingassessments:

‘Assessing the fit of the person to ensure the right boardroom dynamics can be maintained or enhanced.’ (FTSE100,≥25%femaleboardrepresentation,surveyresponse)

‘Character and personality to ensure a proper fit with existing board members and to ascertain their ethos and motivation are aligned with that of the company.’(FTSE250,0%femaleboardrepresentation,surveyresponse)

Companiesandexecutivesearchfirmsagreedthatboardmembersneededtoworktogether,usejudgementandcontributetodebateinaconstructiveway,thereforepersonalskillsandqualitiesareessential.However,theyrecognisedthatthetermsriskedpotentialbiasagainstfemalecandidatesandmadetheappointmentofcandidatessimilartoexistingboarddirectorsmorelikely:

‘Chemistry is polite code for the selector’s bias and it is a barrier to diverse representation if the selector or selecting panel has that bias.’ (Chair,FTSE250,≥25%femaleboardrepresentation,roundtableresponse)

57

‘Gender diversity has become one of the top priorities for many businesses, or at least they say it is. However the reality is often different, when people just recruit in their own likeness, or someone with a similar background they feel comfortable with.’ (Executivesearchfirm,surveyresponse)

Onlyafewcompanieshadtranslatedchemistryandfitintotheskillsandcompetenceswhichgaverisetothequalitiestheywereseeking.Forexample:

‘The Nomination Committee evaluates candidates based on behaviours consistent with company values, personal attributes including sharp intellect, critical assessment and judgement, openness, honesty and tact, their ability to listen actively, develop relationships and build trust, and possessing the courage to suggest changes to stated strategy and be able to develop sound alternatives.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

AFTSEchairidentifiedtheskillsimplicitinchemistry,fitandvaluesas‘challengingandcollegiate,highlevelofconfidencebutlowego’,whichwere‘thingsthatcouldbeexplicitlysetout.’(Chair,FTSE100,1-24%femaleboardrepresentation,roundtableresponse).

Acleardefinitionoftheskillsandexperiencethatenablechemistryandfitismorelikelytoreflectrequirementsidentifiedinaboardevaluation,andalsotoallowforamoreobjectiveassessmentofcandidates.Subjectiveassessmentsofcandidates’personality,chemistryorfitwithexistingboardmembersmayputwomenatadisadvantageintheappointmentprocesswhendeterminedbyalargelymaleboardandleadtorecruitingboardmembersintheirownimage.

58

ConclusionsOurevidencefoundthatsomecompaniescreatedroledescriptionsthatsetoutobjectiveandjustifiableskills,experience,knowledgeandpersonalqualitiesneededfortherole.

However,somecompaniessetrequirementsthatwerepotentiallydiscriminatory.Someindicatedapreferenceforcandidatesofaparticularsexorage,potentiallydisadvantagingthosewithouttheseprotectedcharacteristics.MorethanhalfrequiredpreviousFTSEboardexperience.Insomecasesthismaybejustifiabletocomplementexistingskillsontheboard,orforthespecifictypeofrole.However,inothercasesthisrequirementmayindirectlydiscriminateagainstsuitablyqualifiedfemalecandidatesbecausewomenareunder-representedasagrouponcompanyboards.Somecompaniesrequired‘chemistry’or‘fit’withotherboardmembersratherthandefiningtheskillsandpersonalqualitiesthatlaybehindtheterms.Usingsuchundefinedcriteriaforaselectionprocessmaydisadvantagefemalecandidateswherethesecriteriacouldleadtobiasbasedonunquestionedstereotypesaboutwomen’scapabilities.

Werecommendthatcompaniestakethefollowingactionstoimprovetheirroledescriptionsasawaytowidenthepoolofapplicantsandavoidexcludingsuitablyqualifiedcandidates:

• Ensureroledescriptionsdescribenecessaryskills,experience,knowledgeandpersonalqualitiesfortherole,identifiedbytheboardevaluation.

• Avoidpotentiallydiscriminatoryrequirements,suchasapreferenceforcandidatesofaparticularageorsex,previousFTSEboardexperiencewherenotjustifiable,orusingtermssuchas‘chemistry’or‘fit’whicharesubjectiveandundefined.

59

60

‘Relying on personal networks to identify potential candidates, or not advertising a role, will limit the diversity of the candidate pool.’

Chapter 6: The search process Severalindependentreviewshaverecommendedthatcompaniesuseexecutivesearchfirmstoimproveobjectivity,transparencyanddiversityintheappointmentprocess(Higgs,2003;Tyson,2003;Davies,2011).Manycompaniesnowuseexecutivesearchfirmstorecruitforboarddirectorroles.

TheroleofcompaniesandexecutivesearchfirmsinthesearchprocessandtheirrelationshipshouldbeguidedbyprinciplessetoutintheUKCorporateGovernanceCodeandtheEqualityAct2010.

TheUKCorporateGovernanceCoderecommendsthatthesearchforandappointmentofboardmembersshouldbemadeonmerit,againstobjectivecriteriaandrecognisingthebenefitsofdiversityontheboard,includinggender(FRC,2014,p.11,B.2).Companiesshouldidentifyintheirannualreportanyexternalsearchfirmused,orgiveanexplanationiftheyhavenotusedoneornotadvertisedtheappointment(FRC,2014,p.12,B.2.4).

TheEqualityAct2010requiresthatemployersdonotdiscriminateintherecruitmentprocess,whetherundertakenbythemselvesoranagent,suchasanexecutivesearchfirm.Thismeansthatemployersshouldnotinstructorcauseanexecutivesearchfirmtodiscriminatebysuggestingthattheyprefertoappointapersonwithparticularprotectedcharacteristics.Publicisingarolewidelythrougharangeofchannels,includingadvertising,willhelpbroadenthepoolofcandidatesandincreasediversityasitenablesindividualsfromunder-representedgroupstoapplyforroleswhichtheyareotherwiseunlikelytofindoutabout.Relyingonpersonalnetworkstoidentifypotentialcandidates,ornotadvertisingarole,willlimitthediversityofthecandidatepool.Arecruitmentprocessthatexcludesparticularprotectedgroupsmaybepotentiallyunlawfulifthecircumstancesarenotjustifiable.

Weassessedhowcompaniesinstructexecutivesearchfirmsandbothusenetworksandadvertisinginthesearchprocess.Weconsideredwhethertheuseofexecutivesearchfirmshadimprovedobjectivityandtransparency,andhadencourageddiverseapplicantswithrelevantexperiencetoapplyforboardroles.

61

62

The use of executive search firmsMostFTSE350companies(91%)usedexecutivesearchfirmsforexecutiveandnon-executiveappointments.ThiswasmorelikelyinFTSE100thanFTSE250companies(96%and89%respectively),andincompanieswith25%ormoreand1-24%ofwomenontheirboards,thancompanieswithnowomenontheirboards(95%,90%and71%respectively)(seeAnnex4,TableA6.1).29%ofcompaniesdidnotuseexecutivesearchfirmsatallforexecutivedirectorappointmentsand13%didnotusethemfornon-executivedirectorroles(seeAnnex4,TablesA6.2andA6.3).

Theuseofexecutivesearchfirmshashadapositiveimpactonthediversityofsomeappointments.In2012/13and2013/14,companiesthatusedthemwerestatisticallymorelikelytohaveahigherproportionofwomenontheirboardsthancompaniesthathadnot(seeAnnex4,TablesA6.4andA6.5).

Thepositiveassociationmaypartlyreflectthatjustoverhalfofcompanies(55%)requiredtheirexecutivesearchfirmtobeasignatorytotheVoluntaryCodeofConduct,13 whichtheysawasanindicatorofbestpractice(seeFigure6.1andAnnex4,TableA6.6).

13TheDaviesReview(2011)recommendedexecutivesearchfirmsdrawupavoluntarycodeofconducttoaddressbestpracticeingenderdiversityandsearch.TheVoluntaryCodeofConduct,publishedin2011,doesthis.TheEnhancedCode,publishedinJuly2014,setouthigherstandardsandanaccreditationprocesstorecogniseexecutivesearchfirmsthathadastrongtrackrecordingenderdiversityandboardappointments.

63

Figure 6.1:FTSEcompanieswhorequiretheexecutivesearchfirmstheyusetobesignatoriestotheVoluntaryCodeofConductproportionofwomenonboards

ESFs used are required to be signatory of the Voluntary Code of Conduct

ESFs used are not required to be signatory of the Voluntary Code of Conduct

0% 20% 40% 60% 80% 100%

% of FTSE Companies

1-24% FBR

≥25% FBR

All respondents

0% FBR

106 (61.6%) 66

44 (46.8%) 50

158 (54.9%) 130

125 (29.4%)


Notes:TheparticularquestionaskedwasQ35:DoesyourcompanyrequireitsexecutivesearchfirmstobeasignatoryoftheVoluntaryCodeofConductforExecutiveSearchFirms? FBR=femaleboardrepresentationin2013/14. ESFs=executivesearchfirms.

Base:Allrespondents=288,≥25%FBR=94,1-24%FBR=172,0%FBR=17,unknownFBR=5(excludedfromchart).

64

CompaniesthatdidnotstipulatethattheirexecutivesearchfirmshouldbeasignatorytotheVoluntaryCodesaidthiswasbecausetheyonlyusedhighquality,reputablefirmswhomtheyexpectedtooperateinlinewithgoodpractice,sothiswasn’tnecessary.Afewcompanies,mostlyintheFTSE250,wereunawareoftheVoluntaryCode.

Companiessaidthatexecutivesearchfirmshad‘accesstoawiderpoolofpeople’thanindividualcompanies(Companysecretary,FTSE250,1-24%femaleboardrepresentation,female,interviewresponse).Companiesalsotoldusthatexecutivesearchfirmsofferedanindependentviewpointandbyclarifyingtherolebriefandsearchingmorewidelywere‘ensuringthattheoldboy’snetworkisnotbeingusedtosourcenewdirectors’(Groupcompanysecretary,FTSE100,≥25%femaleboard).Theyalsoactedas‘animpartialarbiter’(Companysecretary,FTSE100,≥25%femaleboard)whereboardmembersmighthavemoretraditionalviewsabouttheappropriatecharacteristicsofcandidatesforarole.

Company instructions to executive search firms on diversityCompaniescanuseexecutivesearchfirmstohelpidentifyabroaderrangeofcandidates,includingwomen,forboardappointments.However,itwouldbeunlawfulforacompanytoinstructanexecutivesearchfirmtofindafemalenon-executivedirectorortofulfilatargetorquotawherethatmeanstreatingbetterqualifiedcandidateswiththeprotectedcharacteristiclessfavourably.

Of165companiesthatdescribedtheirinstructionstoexecutivesearchcompanies14:

• 41instructedordiscussedtheirdiversityaspirationswiththeexecutivesearchfirm

• 37gaveinstructionsaboutthegendercompositionofthelist

• 22providedanexplanationorcopyoftheirboardordiversitypolicy,and

• 10statedapreferenceforafemalecandidatewithparticularskills,withaverysmallnumberspecifyingthenameandgender,orthegenderandlocation,ofspecificcandidates.

14BasedonresponsestoFTSEcompanysurvey(2013/14)Q40:Pleaseprovideexamplesoftheinstructionsprovidedbyyourcompanytoitsexecutivesearchfirmsregardingthespecificgenderdiversityaspirationsoftheboard.Anexplanationofwheredocumentationoutliningtheseinstructionscanbesentwillbeincludedattheendofthesurvey.Base=209.

65

Somecompaniesinstructedtheexecutivesearchfirmspecificallytofindwomenorsetquotasofwomen.ThiswouldbeunlawfulundertheEqualityAct2010wherethatmeanttreatingbetterqualifiedcandidateswithoutthetargetedcharacteristiclessfavourably.

‘In one case, we specifically sought a Continental European-based woman to fill a non-executive director role. In another case, we specifically asked for a UK-based woman to fill a non-executive director role, who could take on the chairmanship of our Audit and Compliance Committee.’ (FTSE100,≥25%femaleboardrepresentation,surveyresponse)

‘Executive search firms are asked to provide long lists of potential candidates which are as diverse as possible. We also request lists composed of only female candidates.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

Executivesearchfirmsreportedthatsomecompanieslinkedtheiraspirationsforfemalecandidatestotheunder-representationofwomenontheirboards,butconsideredmaleandfemalecandidatesinasimilarway.Othercompaniesexpressedapreferenceforacandidateofaparticulargenderorage.ThiswouldalmostalwaysbeunlawfulundertheEqualityAct2010asthisexcludessuitablyqualifiedindividualsfromapplyingfortheserolesbecausetheydonothavetherequiredprotectedcharacteristic:

‘There was an explicit concern that the board was dominated by men and required a female director. There was little appetite for an additional man to join the board and so the candidates considered at long and shortlist were exclusively female.’ (Executivesearchfirm,surveyresponse)

66

The executive search firm commitment to diversityExecutivesearchfirmsbelievedthattheircommitmenttoimprovinggenderdiversityandtheirmethodsofsearchinghadwidenedcandidatepoolsandenabledmorewomentofillboardpositions(seeAnnex4,TableA6.7):

• 89%hadapolicytoimprovegenderdiversityintheirboardrecruitmentexercises

• 70%hadmeasurableobjectivesforimprovinggenderdiversityintheirboardrecruitmentexercises,and

• 68%indicatedontheirwebsitethattheyweresignatorytotheVoluntaryCodeofConductforExecutiveSearchFirms.

However,somecompaniestookamorecriticalviewofthecommitmentofexecutivesearchfirmstoincreasingthenumberofwomeninthecandidatepool.Afewcompaniessuggestedthattheysimplyprovidedcandidatesalreadyontheirbookswhomettheirperceptionofsuitabilityratherthansearchingmorewidely:

‘They just haven’t got the time for people outside of who they think they should be using.’(Chair,FTSE250,≥25%femaleboardrepresentation,female,interviewresponse)

Manycompaniesalsohadlong-standingrelationshipswithexecutivesearchfirmswhichtheyfelthelpedthefirmunderstandtheneedsofthebusiness.Theselectionofanexecutivesearchfirmwasrarelyacompetitivetender.Somecompaniesrecognisedthatthisoverlycloserelationshipmightresultinanopaquerecruitmentprocessandlackofdiversesearchnetworks.Forexample:

‘We have been loyal to one search firm for some years: but … their networks do dry out and you need to cast your net wider.’ (Chiefpeopleofficer,FTSE100,≥25%femaleboardrepresentation,roundtableresponse)

67

‘It is still very clubby. There is a very close connection between chairman and executive search firm. ... it is very much run as a closed shop.’ (CEO,businessrepresentativeorganisation,roundtableresponse)

Thissuggeststhatdespiteconsiderableprogress,therelationshipbetweenacompanyandanexecutivesearchfirmisnotastransparentasitcouldbe.Insomecasesthismayhaveanegativeimpactoncompanies’effortstoimprovethediversityoftheirboardappointments,asthereisnoincentivefortheexecutivesearchfirmtocontinuallyimprovetheirsearchnetworks.Thecloserelationshipalsomeanstheyarelesslikelytochallengeachair’straditionalexpectationsaboutadirectorappointment.

Somecandidatesalsohadacriticalperspectiveontheroleofexecutivesearchfirms.Candidatestoldusthat,intheirexperience,somehadinvestedtimeinidentifyingadiversecandidatepool,whileothershadputlittleeffortintofinding‘unknowncandidates’.Afewcandidatesdescribed‘coldcalling’recruitersbutnearlyallthosewhoweresuccessfulhadbeenapproachedbyexecutivesearchfirmsforspecificvacancies,orfollowingrecommendationsfromindividualsalreadyintheexecutivesearchfirm’snetwork.

Candidateswerealsoconcernedwhetheranapproachfromanexecutivesearchfirmwasgenuineandbasedonskillsfitorameanstomeetaquota:

‘I was very much put off by [Firm X]. .. the chap there started with, they’re looking for a woman ... that’s the last thing I want to hear. I’m a business person first, I happen to be a woman, I don’t define my skill set as my gender.’ (Non-executivedirectorcandidate,female,interviewresponse)

68

Widening the search processCompaniesandexecutivesearchfirmswantedtowidenthepoolofapplicants.Executivesearchfirmssaidtheyusedarangeofmethodstoidentifycandidatesforacandidatepool.Thisincludedsearchingtheinternet,internalandexternaldatabases,talkingtoclientsandusingpersonalreferencesandrecommendations.

However,relyingonlyonpersonalnetworksandnotadvertisingvacancieswilllimitthediversityofpotentialcandidates.Theseapproachesarepotentiallyunlawfuliftheyexcludeparticularprotectedgroupsfromtherecruitmentprocess.

Personal networks

Nearlyathirdofcompanies(32%)reportedusingthepersonalnetworksofcurrentandrecentboardmemberstoidentifypotentialcandidates(seeFigure6.2).Thiswasmorecommonincompanieswithnowomenontheirboards(67%)thanincompanieswith1-24%and25%ormorewomenontheirboards(33%and25%respectively).FTSE250companiesweremorelikelythanFTSE100tousepersonalnetworks(37%and20%respectively).Useofpersonalnetworkswasmorecommonfornon-executivedirectorthanexecutivedirectorappointments(32%and19%respectively)(seeAnnex4,TableA6.8).

41

69

Figure 6.2:FTSEcompaniesusingnetworksofcurrentandrecentboardmemberstoadvertiseboardvacancies,byproportionofwomenontheboard

Either executive director or non-executive director

Non-executive director appointments

Executive director appointments

0%

% of FTSE companies

1-24% FBR

≥25% FBR

All

0% FBR

32.2%31.5%

19.1%

24.5%23.5%

16.3%

33.2%32.0%

18.5%66.7%

58.3%33.3%

10% 20% 30% 40% 50% 60% 70%


Notes:TheparticularquestionaskedwasQ32:Foreachtypeofboarddirector,howdoesyourcompanyadvertiseboardvacancies?-Networksofcurrentandrecentboardmembers(includedanswersreferringtonetworksin‘Otherpleasespecify’). FBR=femaleboardrepresentationin2013/14.

Base:Allrespondents=317,≥25%FBR=99,1-24%FBR=189,0%FBR=24,unknownFBR=5(excludedfromchart).

Almostathirdofcompaniesusingpersonalnetworksdidnotuseanyothermeansofadvertisingthepost(seeAnnex4,TableA6.9).Forexample:

‘For all our non-executive appointments in recent years… a board member has either known them, or they’ve been recommended by somebody that we know.’ (Chairoftheboardandnominationcommittee,FSTE100,≥25%femaleboardrepresentation,male,interviewresponse)

‘I knew one of our female non-execs personally … and she had a very senior position, and I simply called her and said I need to have lunch with you. And I simply asked her if she would please join the Board.’ (Chairoftheboardandnominationcommittee,FSTE250,≥25%femaleboardrepresentation,male,interviewresponse)

Manyexecutivesearchfirmssaidthattheyreliedoninformalandoccasionallyformalnetworkstowidentheirsearches.

CandidatesweinterviewedsaidthatpersonalconnectionstoFTSEboardchairsandboardmembersopenedtheappointmentprocess.ThemajorityhadexecutivesearchfirmorFTSEboardcontactspriortotheirfirstappointment.

‘I applied because people called me and asked me to. Because so little of the listed world is advertised, it all came through a head hunter mentioning it to me. … I went to see [a contact]. … he introduced me ... to one of the head hunters…Within an hour the [headhunter] had phoned up. … they were told, [named contact] had said, oh, [she] is worth putting into that process.’ (Non-executivedirectorcandidate,female,interviewresponse)

70

Formal networks

Executivesearchfirmstoldusthatitwasimportantforwomentojoinformalnetworkstomakethemselvesvisibleandtoensure‘boardreadiness’.Weweretoldaboutanumberofformalnetworksrunbyprofessionalservicesandaccountancyfirmsorbyexecutivesearchfirms.Somenetworkswereonlyforwomen(andareaformofpositiveactiontodevelopandwidenthetalentpool).Othernetworkswereonlyopentopeoplealreadyholdingboardroles.

Femalecandidatesweinterviewedsaidthenetworkswereusefulforacquiringskillsbutnotfordevelopingcontactsthatledtotheapproachfromexecutivesearchfirms:

‘You need to network with the men. So the female networking events are … interesting and sometimes allow you to… share your experiences, but in terms of networking, not desperately helpful.’ (Non-executivedirectorcandidate,female,interviewresponse)

Onlyfemalecandidatesreportedusingformalgroups.Mensaidtheyreliedonpersonalcontacts.Recentresearchonroutestotheboardroomfoundthatsuccessfulcandidateshadpowerfulsponsorswhoputthemforwardforrolesandthatmenweremorelikelythanwomentobeputforwardinthissituation(SapphirePartners,2015).

Use of advertising

Advertisingrolesinadiverserangeofmediacanleadtoamorediverserangeofapplicantsandpotentiallytotheappointmentofmorewomentoboards.Yetourresearchshowedthatjust2%ofcompaniespublicisednon-executivedirectorappointmentsontheirexternalcorporatewebsites,innewspapersorusingsocialmedia,andonly1%didthisforexecutivedirectorroles.55%ofcompaniesreportedthattheydidnotadvertiseboardappointments(whetherexecutiveornon-executive),afurther29%onlypublicisedthemthroughexecutivesearchfirmsand6%onlythroughpersonalnetworks(seeAnnex4,TableA6.10).Notwidelypublicisingrolesmeansthatqualifiedindividualsdonothavetheopportunitytoapplyforthemandthepoolofpotentialapplicantsislimited.Thismakesitmoredifficulttoimprovethediversityoftheapplicantpoolandfinalappointments.

71

Companiessaidthattheydidnotadvertiseboardrolesbecausetheyreliedonexecutivesearchfirmstosourcesuitablecandidatesandtheywereconcernedthatadvertisingmightattractthewrongtypeofcandidate.Forexample:

‘You’d probably get … a larger candidate list … but [the company] really don’t have the time to go through all that … we try to keep the costs down where we can.’ (Headofcompanysecretariat,FTSE250,1-24%femaleboardrepresentation,male,interviewresponse)

‘We are much keener on pinpointing the candidates ourselves … than being inundated with … a lot of no-hopers. You know the cultural fit here is very important.’ (Chairofboardandnominationcommittee,FTSE100,1-24%femaleboardrepresentation,male,interviewresponse)

‘You never want as a board member somebody who is in the business of trying to find themselves board memberships.’ (Chairofboardandnominationcommittee,FTSE250,≥25%femaleboardrepresentation,male,interviewresponse)

Mostexecutivesearchfirmsalsowerenotinfavourofadvertising.Theybelievedatargetedapproachusingcontacts,socialmediaandtheirowndatabaseswasmorelikelytobesuccessful,asfindingsuitablecandidateswas‘asearchprocessnotanapplicationprocess.’(Executivesearchfirm,roundtableresponse).

72

Executivesearchfirmstoldusthatadvertisingwasinefficientintermsofcostandtime,couldraisepotentialconfidentialityissues15and,givensearchesweresometimesglobal,itwasunclearwheretoplaceanadverttoreachappropriatecandidates.Theyalsoquestionedwhetheradvertisingimprovedthequalityofcandidatesorincreasedthenumberoffemalecandidates:

‘There are roles for which we do advertise, exec roles sometimes… where a client … wants to advertise … but the higher up you get… the narrower the field of people who would really be relevant for it, the less valuable and insightful it really is.’ (Executivesearchfirm,interviewresponse)

‘In our experience, advertising the role does not lead to an increase in the number of women in the candidate pool … than is the case when women are approached proactively about the role by us.’ (Executivesearchfirm,surveyresponse)

Candidatesreportedthatwithoutadvertising,theonlywaytoputthemselvesforward forpositionswastotrytobuildtheirvisibilityandcredibilitywithexecutivesearchfirms,whichwasdifficultwithoutpersonalrecommendationsfromsponsors.Thisisaparticulardisadvantageforwomenwho,researchsuggests,usetheirnetworksforadviceratherthansponsorship(SapphirePartners,2015).

73

15ExecutivesearchfirmssuggestedthatpublicityaboutrecruitmentofacompanychairorCEOmighthaveanimpactonacompany’sshareprice.Publicityaboutrecruitmenttoreplacearetiringnon-executivedirectorwidelyknowntobereachingtheendoftheirfixedtermwouldnothavethesamenegativeeffect.

Afewcompaniesfavouredusingadvertisingtowidenthecandidatepool.Onecompanychairstatedthetenureofboardappointmentswastimelimitedandpublishedinannualreports,sofutureappointmentswere‘notterriblysecretorsensitive’anditwaspossibleto‘mak[e]itmoretransparentwhenthosepositionsarecomingup…becausethereisnogoodreasonwhyitisnottransparent.’(Chair,FTSE250,≥25%femaleboardrepresentation,female,interviewresponse).

Thesecompaniesregardedadvertisingasawaytoreducerelianceonlimited,personalnetworksandattractnewpotentialcandidates:

‘I don’t subscribe to people bringing in their friends, or people they know from others … The only way to open up [the board appointment process] is by … public advertising and using a recruitment company that will find [more diverse candidates] not just the ones that we all see coming up again and again but different kinds.’ (Chair,FTSE250,≥25%femaleboardrepresentation,female,interviewresponse)

‘[The recruitment process] is just too opaque … All board positions should be publically advertised, then suddenly everybody can see much more clearly when there are positions available.’ (Chair,FTSE250,≥25%femaleboardrepresentation,female,interviewresponse)

Somecompaniessaidtheywouldconsideradvertisingifsuggestedbytheexecutivesearchfirmandasawayofwideningtheapplicantpool.Oneexecutivesearchfirmwaspositiveaboutthebenefitsofadvertisinganddescribeditas‘averycrudetool,butpartofthespectrum’toidentifycandidates(Executivesearchfirm,roundtableresponse).

74

WeaskedthePublicAppointmentsCommissionabouttheimpactofadvertisingallpublicappointmentsandweretoldthatthishadnotcausedafloodofcandidatesapplyingforrolesoranyresourcingissues.TheconsequenceofthisapproachwasthatGovernmentwasclosetomeetingitsaspirationforwomentobehalfofnewappointeestopublicboardsby2015(CommissionerforPublicAppointments,2015).16Thisdemonstrateshowwideradvertisementofboardvacanciescanleadtoorganisationssuccessfullyrecruitingmorefemaleboardmembersandimprovingboarddiversity.

75

Of 165 companies that described their instructions to executive search firms about their

gender aspirations or requirements:

instructed or discussed their diversity aspirations with the executive search firm

gave instructions about the gender composition of the list

provided an explanation or copy of their board or diversity policy

stated a preference for a female candidate with particular skills, and a very small number specified the name and gender or the gender and location of specific candidates

41372210

16Womenmadeup45%ofpublicboardappointmentsand36%ofchairappointmentsinOctober2015.

ConclusionsMostFTSE350companiesusedexecutivesearchfirmsandmanyrequiredthesefirmstobeasignatorytotheVoluntaryCodeofConduct.Wefoundthatthesefactorshadapositiveassociationwiththeappointmentofwomentoboards.Someexecutivesearchfirmsweretryingtoextendtheirsourcesanddatabasestoincludemorefemalecandidates,andwereworkingwithcompaniestoencouragethemtoconsiderawiderrangeoftalent–sometimeswithpositiveresults.However,insomecaseslongstanding,overlycloserelationshipsbetweencompaniesandexecutivesearchfirmsmightresultinanopaquerecruitmentprocessandlackofdiversesearchnetworks.

Somecompaniesalsoinstructedexecutivesearchfirmstofindafemalecandidateorprovidefemalelongandshortlists,whichwouldbeunlawfulundertheEqualityAct2010.Companiesandexecutivesearchfirmswerereluctanttopublicisevacanciesmorewidelyandsomereliedheavilyonusingpersonalnetworkstoidentifypotentialcandidates.Theselimitthepoolofpotentialcandidates,makingitmoredifficulttoimprovethediversityoftheapplicantpoolandensurethemeritofthefinalappointment.

Werecommendthatcompaniestakethefollowingactionstoimprovetransparencyanddiversityinthesearchprocess:

• Selectanexecutivesearchfirmthatcandemonstrateitseffectivenessinimprovingdiversityinappointments.

• Avoidgivingunlawfulinstructionstoanexecutivesearchfirm,suchasrequestingan all-womenlonglistorshortlist.

• Broadenyourcandidatepoolbyadvertisingwidelythroughappropriatechannels,unlessaroleisbusiness-sensitive.

• Avoidrelyingonlyonpersonalnetworkstoidentifypotentialcandidates.

76

77

Chapter 7: Selection Toselectthebestcandidatebasedonmerit,anemployershouldhaveanobjective,consistentandfairselectionprocess.Thismeansthejobdescriptionandpersonspecificationshouldsetoutclearrequirementsforcandidates’skills,knowledge,experienceandpersonalqualities,andemployersshouldassesstheserigorouslyininterviewsorotherformsofassessment.Selectingthebestcandidateforarolealsorequirescompetitiveappraisalagainstawiderpoolofpotentialcandidates,whichgivesanyonewithsuitableexperiencetheopportunitytoapply.

Theprinciplesoffairness,consistencyandtransparencyunderpintheUKCorporateGovernanceCodeandtheEqualityAct2010.TheUKCorporateGovernanceCode(2014,B.2,p.11)recommendsthatcompanieshaveformal,rigorousandtransparentproceduresfortheappointmentofnewdirectorstotheboard.TheEqualityAct2010prohibitsdiscriminationintherecruitmentprocess.Thismeansthatemployersmustassessapplicantsobjectivelyagainstrolerequirements,andassessmentcriteriaorquestionsshouldnotdisadvantagepeoplebecauseofprotectedcharacteristics.Employersmustnotbasetheirselectiondecisionsonstereotypicalassumptionsorprejudice.Arecruitmentprocessthatexcludesordisadvantagespeoplewithparticularprotectedcharacteristicsislikelytobeunlawful.

Welookedatwhethercompaniesobjectivelyassessedcandidates’skills,knowledge,experienceandpersonalqualitiesduringlonglisting,shortlistingandtheinterviewprocess.

For both non-executive and executive director roles, most

companies relied on a competency and skills-based interview

and around half used the same questions for each candidate to ensure consistent assessment

Selection for longlists and shortlistsSomecompaniesprovidedverylittledetailabouttheirprocessesforselectingcandidatesforalonglistorshortlistforexecutiveornon-executivedirectorroles,orsolittleastoimplytherewasnorigorousprocessinplace.17Othercompaniesdiddescribeaclearandrigorousselectionprocess.

Whereboardsreliedonpersonalnetworkstoidentifycandidatesfornon-executiverolestheysometimeshadnocompetitiveassessmentprocess.Forexample:

‘The Board discussed a potential candidate for directorship who has very strong credentials and it was agreed that the Chairman would approach this candidate confidentially. … The … outstanding nature of the candidate precluded the need to use head-hunters or the creation of a potential list of candidates.’(FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Thistypeofapproachcouldbeunlawfulifitexcludedpeoplesharingparticularprotectedcharacteristics.

Forexecutivedirectorroles,manycompaniesidentifiedpotentialcandidatesintheirowninternaltalentpoolandthroughsuccessionplanning.Asaresult,afewcompaniessaidassessmentandlonglistingwere‘notapplicable’.

Whetherforexecutiveornon-executiveroles,theabsenceofacompetitiveselectionprocessbasedonclear,objectivecriteriamaymeanthatthechosencandidateisnotnecessarilythebestfortherole.

78

17Basedonanalysisofopen-endedresponsestoQ46:Howdoyouassessthesuitabilityfortheroleofallcandidatesonthelonglistforanon-executiveboarddirectorrole?,Q47:Howdoyouassessthesuitabilityfortheroleofallcandidatesontheshortlistforanon-executiveboarddirectorrole?,Q54:Howdoesyourcompanyassessthesuitabilityofallcandidatesonthelonglistforexecutiveboarddirectorroles?andQ55:Howdoesyourcompanyassessthesuitabilityofallcandidatesontheshortlistforexecutiveboarddirectorroles?

Companiesinstructingexecutivesearchfirmsforexecutiveandnon-executiveboardappointmentsreliedonthefirmtoscreenpotentialcandidatesagainsttheagreedroledescriptiontocreatealonglist.Companiesthenassessedthelonglistedcandidatesagainsttheroledescriptionandsometookintoaccountcandidates’interviewperformancetoidentifyashortlist.18Afewcompaniesalsoconsidereddiversity,‘fit’andpersonality,referencesandindustryreputation,andnetworksorexistingrelationshipswithboardmembers.

Forexecutiveappointments,companiessaidtheyassessedoperationalandtechnicalcompetencies.Todothis,theselectionprocessoftenincludedpsychometrictestingandpsychologicalassessmentsand,insomecases,bespokeskillsassessments.Afewcompaniessaidthattheybenchmarkedinternalcandidatesagainstexternalcandidatesandreliedonexecutivesearchfirmstocreateabroadercandidatepoolreflectingwidertalentinthemarket.Theythencomparedtheinternalandexternalcandidates.

‘The search firm will … map … the market selecting candidates with the requisite skills and experience based on the role specification …. The search firm will interview and review the CVs before presenting a summary of this … to the company. The HR director will review the long list and compare with any internal candidates who have been similarly assessed to create a full picture of potential candidates. This is then discussed with the CEO to finalise the long list.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

Thisapproachallowsforconsistentassessmentofawiderpoolofpotentialcandidates,ensuringselectionofthesuccessfulcandidateisbasedonmerit.Italsoopensuptheapplicationprocesstoexternalcandidates,someofwhommaybewomen.

79

18BasedonresponsestothefollowingquestionsintheFTSEcompanysurvey(2013/14):Q46andQ47:Howdoyouassessthesuitabilityofcandidatesonthelonglistandshortlistfornon-executivedirectorboardroles?;Q54andQ55:Howdoyouassessthesuitabilityofcandidatesonthelonglistandshortlistforexecutivedirectorboardroles?

InterviewsCompaniesreportedawidevarietyofdifferentinterviewapproachesincludingformalandinformalinterviews,one-to-oneandpanelinterviews.Somecompaniesconductedoneroundofinterviews,butmostcarriedoutseveralrounds.Executivesearchfirmsreportedthatcandidateswereofteninterviewedinformallythroughouttherecruitmentprocessthrough‘firesidechats’,dinnerswithcompanychairsormeetingswithotherboardmembers.

Companiessaidinterviewsusuallycoveredcriteriainthepersonspecificationandexaminedthecandidates’experience,skillsandknowledge,aswellasinsightintothecompanyandsector,andtheirfitwiththeboard.

Forbothnon-executiveandexecutivedirectorroles,mostcompaniesreliedonacompetencyandskills-basedinterviewandaroundhalfusedthesamequestionsforeachcandidatetoensureconsistentassessment.TherewaslittledifferencebyFTSEIndexorproportionofwomenonboards(seeAnnex4,TablesA7.1andA7.2).

Athirdofcompaniessaidtheyuseddifferentquestionsforeachcandidate.Insomecases,thisallowedinterviewerstoprobeintocandidates’particularskillsandexperience.

‘This would be a combination of core questions which are the same for each candidate plus tailored questions relevant to the individual background of each candidate.’ (FSTE100,≥25%femaleboardrepresentation,surveyresponse)

However,inothercasesinterviewingwasinformalanddidnotclearlyrelatetothecriteriainthejobdescription.Companiesdescribedthisas‘conversationsratherthaninterviews’or‘non-scriptedconversations’.

‘Every interview and every candidate is different so there is no set formula.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Whereselectionisbyaseriesofone-to-oneinterviewsratherthanapanelinterview,ensuringthatselectorsdiscusstheirindividualassessmentsmayreducetheriskofinconsistencyandtheimpactofbiasbasedonirrelevantfactors.

80

Chemistry and fitCompaniestoldusthatinformalassessmentsallowedthemtoexplorethe‘chemistryandfit’ofcandidatesshortlistedforanexecutiveornon-executivedirectorrole.Executivesearchfirmssaidthatchemistrywasanimportantelementoftheinterviewandprovidedcandidatesandboardmemberswithanopportunitytoassesseachother.Someexecutivesearchfirmsreportedthatculturalfitwasmoreimportantthanskillsandexperienceattheshortlistingstage.However,usingundefined,poorlydefinedorsubjectivecriteriamayresultininconsistentassessmentofcandidates,andmayalsodisadvantagefemalecandidateswherethesecriteriaarebasedonunquestionedstereotypesaboutwomen’scapabilities.

AsdiscussedinChapter5,mostcompanieshadnotdefinedcriteriaorqualitiesintheirroledescriptionsthatmightindicate‘chemistryorfit’andthiswasalsoreflectedintheirdescriptionofhowtheyinterviewedcandidatestoassessthis.Somecompaniessaidtheylookedatcandidates’‘levelofinterestintheroleandthegroup’,19otherstalkedof‘culturalfit’,20‘compatibility’,21or‘personalityandfit’.22Butveryfewrespondentsdescribedqualitiesorexperiencethatmightsitbehindtheseandmakeforamoreeffectiveboardmember.

Weaskedindividualswhohadappliedforboardrolesabouttheirexperienceofbeinginterviewed.Onecandidatesaidquestionsaboutherpersonalinterestsandcircumstanceswereareasonablewaytocreatecommongroundfordialogue.Anotherregardedthesequestionsasirrelevanttoherabilitytoperformanon-executivedirectorrole:

‘What did I do in my spare time? … What did my husband do? Which is hardly relevant. … And obviously exploring a little bit of my professional background but not in any detail… Did I play golf?’ (Non-executivedirectorcandidate,female,interviewresponse)

81

19FSTE100,≥25%femaleboardrepresentation,surveyresponse. 20FSTE250,≥25%femaleboardrepresentation,surveyresponse. 21FTSE250,1-24%femaleboardrepresentation,surveyresponse. 22Groupcompanysecretary,FTSE100,1-24%femaleboardrepresentation,female,interviewresponse.

Severalfemalecandidatessaidtheywereaskedquestionstheythoughtmalecandidateswereunlikelytoface.Forexample:

‘The first thing he said was I see you have two teenage girls. That must be hard work doing that holding down a full-time job. And I just thought well I won’t be getting a non-executive director through you then. …. It was unconscious obviously, it wasn’t intended. But it was just immediately that, how on earth does a woman have a career when you’ve got these children. You’ve clearly got bias. … I didn’t follow up with them. That sort of put me off.’ (Non-executivedirectorcandidate,female,interviewresponse)

Somecandidatespreferredmoreformalassessmentsbecausetheyfeltthatinformaldiscussionswerelinkedtoquestionsabouttheirpersonalsituation,whichtheyfeltallowedforbiasedassumptionsabouttheirabilitytoperformintherole.

82

Conclusions Ourevidenceshowsthatmostcompaniesselectcandidatesforlonglistsandshortlistsbasedoncriteriasetoutinexecutiveandnon-executiveroledescriptions.Mostcompaniesalsorelyondifferenttypesofformalinterviewsusingquestionsbasedontheroledescriptions.Thisallowsforaconsistentandfairselectionprocessandmayreducetheopportunityforselectiondecisionsaffectedbyirrelevantfactors(oftenbasedonacandidate’sprotectedcharacteristics)orassumptionsabouttheirabilitytoperformintherole.

Somecompaniesdidnothaveatransparentandobjectiveselectionprocessfornon-executiveappointments,relyinginsteadonpersonalrecommendationwithoutcompetition,orinformalinterviewingunrelatedtocriteriaintheroleprofile.Femalecandidatesweresometimesaskedquestionsaboutbalancingworkandfamilyresponsibilitieswhichmayplacethematadisadvantagebyallowingstereotypestoinformselectors’judgments.Aninformalandinconsistentassessmentprocessisunlikelytosupporttheappointmentofthebestcandidateonmerit.

Mostcompaniesassessedchemistryandfitofcandidatesthroughouttheappointmentprocess.Boardmembersneedtoworktogetheranddebateinaconstructiveway,sopersonalqualitiesareanessentialelementofbeinganeffectiveboardmember.However,manycompaniesdidnotidentifythecriteriathatwouldleadtoeffectivenessasaboardmember.Usingundefinedcriteriamayresultinsubjectiveandinconsistentassessmentofcandidates,andmayalsodisadvantageordiscriminateagainstwomenwherethesecriteriaarebasedonunquestionedstereotypesabouttheircapabilities.

Werecommendthatcompaniesandexecutivesearchfirmstakethefollowingactionstoimprovetherigouroftheirselectionprocess:

• Assesscandidatesconsistentlyagainstobjectivecriteriaidentifiedintheroledescriptionthroughouttheappointmentprocess.

• Avoidquestionsaboutirrelevantfactorsthatmayintroducebiasintotheassessmentprocess.

• Ensureselectorsdiscusstheirindividualassessmentswhereselectionisbasedonone-to-oneorinformalinterviews,toensureconsistencyandreducetheimpactofbiasbasedonirrelevantfactorsorstereotypes.

• Definetheskills,knowledge,experienceandpersonalqualitiesthatgiveriseto‘chemistry’and‘fit’,andassesscandidatesagainstthesecriteria.

83

84

‘We looked at whether nomination committees were addressing the under-representation of women and promoting diversity on their boards in the way they made and reported on appointments.’

Chapter 8: Nomination committeesThenominationcommitteeisresponsibleforconsideringdiversityaspartofitsroleinleadingtheboardappointmentprocess.Tomakefairandtransparentappointmentsonmerit,itscompositionshouldbeabalanceofmenandwomen,abletoapplyequalitylawandcorporategovernancerequirementstotheprocess.

TheUKCorporateGovernanceCoderecommendsthatcompanieshaveanominationcommitteeheadedupbytheboardchairoranindependent,non-executivedirectorwhoshouldleadtheboardappointmentprocessandmakerecommendationsonsuitablecandidates.Companyboardsshouldsatisfythemselvesthatplansareinplacefororderlysuccessionforappointmentstotheboardandtheseniormanagementteam.TheUKCorporateGovernanceCoderequirescompanies’annualreportstoincludeaseparatesectiondescribingtheworkofthenominationcommittee(FRC,2014,p.11andp.14,B.2.1andB.2.4).

Welookedattheroleofnominationcommitteesintheappointmentprocess,thecompositionofselectionpanels,andtheirknowledgeofequalityandcorporategovernancerequirements.

85

The role of the nomination committee Figure8.1showsthatin25%ofcompaniesthecompanychairand/ornominationcommitteechairandnominationcommitteememberswereinvolvedinallstagesoftheselectionprocessfornon-executivedirectorappointments.However,in4%ofcompaniesonlythecompanychairand/ornominationcommitteechairwereinvolvedinallstages.23 About60%ofcompaniesreliedonthecompanychairand/ornominationcommitteechairwithnominationcommitteemembersforsomestagesoftheselectionprocess,namelyidentifyingtherolebrief,longorshortlistingandinterviewing.Inaround15%ofcompanies,however,thecompanychairand/ornominationcommitteechairundertooktheseactivitieswithoutinvolvementofnominationcommitteemembers.

86

23Ourdataonlyidentifiedwheretherewasanominationcommitteechairthatwasdifferenttothecompanychair.Itdoesnotdifferentiatebetweencompanychairsthatdidordidnothavenominationcommitteechairresponsibilities.

In 25%

of companies the board chair and/or nomination committee chair and nomination committee members were involved in all stages of the selection process for non-executive director appointments

62%

of search firms reported that in their experience their clients were aware of the UK Corporate Governance Code requirements on diversity ‘to a great extent’

27%

of search firms reported that in their experience their clients were aware of the way the Equality Act 2010 applied to the board appointment process ‘to a great extent’

Figure 8.1:Useofcompanychairand/ornominationcommitteechairand/ornominationcommitteemembersinnon-executivedirectorappointmentsinFTSEcompanies

87

0% 10% 20% 30% 40% 50% 60% 70%

% of FTSE companies with data on involvement in NED appointment process

All stages 4%

Appointment decision 9%

Interview 14%

Longlisting or shortlisting 17%

Identifying skills requirement, job/rolebrief and person specifications 12%

All stages 25%

Appointment decision 50%

Interview 63%

Longlisting or shortlisting 61%

Identifying skills requirement, job/rolebrief and person specifications

Company chair or nomination committee chair AND nomination committee members

66%

Company chair or nomination committee chair WITHOUT nomination committee members

Source:FTSEcompanysurvey(2013/14)responsestoQ45:Pleaseindicatetheindividualsthatareinvolvedineachstageoftherecruitmentandappointmentprocessfornon-executiveboardpositions.Pleaseselectallthatapply.

Base:AllrespondentsprovidingdataforQ45=307.

Notes:Companychairreferstojustthatrole,whereascompanychairornominationcommitteechair(wheredifferent)referstoeitherofthetworolesandincludescompaniesthatusedbothoreitheroftheserolesintheappointmentprocess.

Executivesearchfirmsandthefullboardofdirectorsalsoplayedrolesatspecificstagesoftheselectionprocess24(seeAnnex4,TableA8.1).

Forexecutivedirectorroles,48%companiesreportedusingtheCEOand41%thecompanychairateverystage,assistedinsomestagesbythenominationcommitteeandadvisedbytheHRdirector(seeAnnex4,TableA8.2).

Somerespondentsthoughtitwasappropriatethatboardchairsplayedasignificantroleinappointments.Theboardchairwasresponsibleforcreatinganeffectiveboardthatsupportedthelong-termsuccessofacompany,andthechairneededtobeconfidentthatdirectorscouldworktogether.

Othersbelievedthattoomuchpowerlayinthehandsofthecompanychairwhenheorshealsochairedthenominationcommittee,forexample:

‘There are some chairmen who clearly use the nom co as a fig leaf for their own decisions which is wrong.’ (Managingpartner,executivesearchfirm,male,roundtableresponse)

Othersfeltseparatingtherolesofthechairandnominationcommitteemightencouragemorediversityinappointments:

‘We are all tailored by our own experience and you can call that bias if you like, but if you have a broader group, and certainly led by a non-exec, other than the chairman, you have more chance of getting constructive challenge as a criterion as opposed to: [he] is a good old chap or she is a good...’ (Chair,FTSE100,≥25%femaleboardrepresentation,male,roundtableresponse)

AlthoughtheUKCorporateGovernanceCodegivesthenominationcommitteetheresponsibilityforleadingonboardappointments,somerespondentsdescribeditas‘thepoorrelation’ofboardcommitteeswithlessrigorousdisclosurerequirementsthanthosefortheauditandtheremunerationcommittees.Onecompanychaircalledreportsfromthe

88

24Executivesearchfirmsweremostofteninvolvedinidentifyingtherolebrief,longandshortlisting,andtoalesserextentininterviewing.Thefullboardofdirectorswasmostofteninvolvedinidentifyingtherolebrief,interviewingandthefinalappointment.

nominationcommittee‘anodyne’25andabusinessorganisationdescribedthemas‘boilerplating’,26asthereportsdidnotprovidemuchdetailabouttheappointmentprocessorhowithadtakendiversityintoaccount.

Somerespondentsalsoreportedthatnominationcommitteesdidnotmanagesuccessionplanningeffectivelyandcoulddomoretoholdtheexecutiveteamtoaccountondevelopingdiversityinthetalentpipeline:

‘The nomination committee should be focusing much more on really interrogating management on the targets they are setting, the measures they are putting in place and the progress they are making in terms of the executive pipeline.’(Managingpartner,executivesearchfirm,male,roundtableresponse)

Composition of appointment panelsFornon-executivedirectorappointments,womenmadeup18%ofselectionpanels,makinglonglisting,shortlistingandfinaldecisions(seeAnnex4,TableA8.3).TheproportionofwomenonselectionpanelswashigherinFTSE100thanFTSE250companies(21%and16%respectively).Asmightbeexpected,companieswith25%ormorewomenontheirboardshadahigherproportionofwomenontheirselectionpanels(22%),incomparisontothosewith1-24%ofwomenontheirboards(13%)ornowomenontheirboards(1%)(seeAnnex4,TableA8.4).

Forexecutivedirectorroles,womenmadeup24%ofallselectionpanels(seeAnnex4,TableA8.4).CompaniesintheFTSE100andwithahigherproportionofwomenontheirboardshadselectionpanelswithhigherproportionsofwomenonthem(seeAnnex4,TablesA8.5andA8.6).

Thedataonexecutiveandnon-executiveappointmentpanelssuggeststhatcompanieswithmorewomenontheirboardsareensuringthattheirperspectiveisusedonboardappointmentpanels.

Somerespondentssuggestedthatthenominationcommitteecoulduseexternaladvisorstoimprovethediversityoftheircompositionandthatofselectionpanels.

89

25Chair,FTSE100,1-24%femaleboardrepresentation,female,interviewresponse.

26Businessorganisation,interviewresponse.

Knowledge of equality and corporate governance requirementsFigure 8.2:Trainingforthoseinvolvedintheappointmentprocesstoensureawarenessofrelevantlegislation,byFTSE100andFTSE250

90

0%

% o

f FTS

E co

mpa

nies

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Training on eitherdiscriminatory practices OR

unconcious bias

13%

18%

11%

Training and guidance about the UK Corporate Governance Code

44%46%

43%

No training

9% 10% 9%

All organisations FTSE 100 FTSE 250


Notes:TheparticularquestionaskedwasQ31:HowdoesyourcompanyensurethatpeopleinvolvedineachstageoftheboardappointmentprocessareawareoftherequirementsoftheEqualityAct2010andtheUKCorporateGovernanceCode(2012,2014)requirementsforboardappointments?Pleaseselectallthat apply.

Base:AllrespondentstoQ31=312,FTSE100=94,FTSE250=214.

Figure8.2showsthatjustunder10%ofcompaniesreportedthattheyprovidednotrainingtopeopleinvolvedintheappointmentprocessontheUKCorporateGovernanceCodeordiscriminationinrecruitment.Theydescribedthemselvesascontentthattheirboardhadsufficientexperienceandawareness.Just13%companiesprovidedtrainingonequalitylawandavoidingunconsciousbias,andFTSE100companiesweremorelikelythanFTSE250companiestoreportthis(18%incomparisonwith11%).44%ofcompaniesprovidedtrainingontheUKCorporateGovernanceCode.

52%ofcompaniessaidthattheyusedspecialistadvisorstoguidethemonequalityandcorporategovernanceandthiswashigherforcompanieswith25%ormoreand1-24%womenontheirboards,comparedtocompanieswithnowomenontheirboards(60%,51%and21%respectively).Nearly50%ofcompanieswithnowomenontheirboarddidnotusespecialistadvisorsorprovidetraining(seeAnnex4,TableA8.7).

Thesefindingswereconfirmedbyexecutivesearchfirms’perceptionsabouttheirFTSE350clients:62%reportedthatintheirexperiencetheirclientswereawareoftheUKCorporateGovernanceCoderequirementsondiversity‘toagreatextent’,31%were‘somewhat’awareand8%have‘verylittle’awareness.Inaddition,58%ofexecutivesearchfirmsreportedthatintheirexperiencetheirclientswere‘somewhat’awareofthewaytheEqualityAct2010appliedtotheboardappointmentprocess,27%thattheywereaware‘toagreatextent’and15%thattheyhave‘verylittle’awareness(seeAnnex4,TableA8.8).

Somecompaniessurveyresponsesindicatedthattheywereunawareoftheimplicationsofequalitylawfortheirappointmentprocess.Forexample:

‘[The Equality Act is] Not relevant as the last appointment made was as the result of a personal introduction by an existing Board member.’ (FTSE250,0%femaleboardrepresentation,surveyresponse)

91

92

Severalcompaniesreportedthattheyhadnoparticularknowledgeaboutequalitylaw butreliedon‘theprofessionalismoftheheadhunter’27or‘appropriateguidance’28from theexecutivesearchfirm,andthattrainingwasnotneededgivenboardappointmentswerefew.

Incontrast,somecompaniesprovidedtrainingorin-houseexpertiseonequalityanddiversity:

‘The Nominations Committee who is in charge of Board appointment process is fully trained in all relevant legal requirements. In addition, both the Company Secretary and the General Counsel support the Committees.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

ConclusionsWefoundthatinmostcompaniesthecompanychairand/orchairofthenominationcommittee,aswellasothermembersofthenominationcommittees,wereinvolvedintheboardappointmentprocess.Asmallproportionofcompaniesreliedsolelyontheirchairswithnoinvolvementofthenominationcommitteewhenidentifyingtherolebriefdescription,atlongandshortlistingstages,andduringinterviewingstages.

Somerespondentssuggestedseparatingthecompanychairandnominationcommitteechairroletoensurethattheselectionprocessdidnotreflectthebiasofthecompanychairandtheirviewswereopentodiscussion.

Wefoundthatthepercentageofwomenonnominationcommitteeselectionpanelswashigherincompanieswithahigherpercentageofwomenontheirboards.Thissuggeststhesecompaniesareabletobringwomen’sperspectivestotheboardappointmentprocess.

27FTSE250,≥25%femaleboardrepresentation,surveyresponse.

28FTSE250,≥25%femaleboardrepresentation,surveyresponse.

93

Mostcompaniesdidnotprovidetrainingtonominationcommitteemembersorthoseinvolvedintheappointmentprocessaboutavoidingdiscriminationortheimpactofunconsciousbiasintheselectionprocess.However,nearlyhalfofcompaniesprovidedtrainingontheUKCorporateGovernanceCode.Halfofcompanieswithnowomenontheirboardsaidthattheydidnotuseaspecialistadvisororprovidetraining.

Werecommendthatcompaniestakethefollowingactionstoreducethepotentialforbiasindecisionmakingandimprovetheirappointmentsprocess:

• Ensurethenominationcommitteeisinvolvedintheappointmentsprocessalongsidethechair.

• Ensurethatthenominationcommitteeandselectionpanelsarediversetobringdifferentperspectivestotheselectionprocess.

• Providetrainingtoeveryoneinvolvedintheappointmentsprocessonequalitylawandavoidingunconsciousbias.

Inaddition,theFRCshouldclarifytheroleandremitofthenominationcommitteeanditschairinrelationtodiversityandboardappointments,anditsdisclosurerequirementsintheannual report.

94

‘Widening the pool of applicants enables employers to access the best talent from which to select on merit.’

Chapter 9: Improving diversity in the talent pipeline and the candidate pool Ifcompaniesaretosuccessfullyaddresstheunder-representationofwomenontheirboards,theyneedtomaximisethenumberofsuitablyqualifiedfemaleapplicants.Wideningthepoolofapplicantsenablesemployerstoaccessthebesttalentfromwhichtoselectonmerit.Intheshortterm,companiescandothisbyseekingcandidatesfromothersectorswhomeettheirrequirements.Inthelongerterm,theyneedtoaddresstheunder-representationofwomenintheirtalentpipelineandatseniorlevels,andconsiderhowrecruitment,retentionandpromotionpracticesmayfacilitatethis.

TheUKCorporateGovernanceCoderecommendsthatcompaniesmakeboardappointmentswithdueregardforthebenefitsofgenderdiversity(FRC,2014,p.11,B.2).Inprohibitingdiscriminationinthemakingofappointments,theEqualityAct2010allowsemployerstotakepositiveactiontoenableorencouragepeopleinprotectedgroupstoapplyforroles,sothattheycancompeteonmeritonaequalfootingwithothers.Positiveactionisvoluntaryandcancoveranyactivityoutsidetherecruitmentorpromotiondecision-makingprocess,provideditisreasonabletothinkthatthegroupisunder-representedandthattheactivityisproportionate.Forsomethingtobeproportionate,itshouldbebalancedagainstitsimpactonotherpeople.Forexample,itislawfulpositiveactiontoencouragewomentoapplyforroleswheretheyareunder-represented,butitwouldnotbelawfultodetermaleapplicants.TheEqualityAct2010alsocontainsa‘tie-breakprovision’whichcanbeused,whereproportionate,inrecruitmentorpromotiondecisionstoselectapersonfromaprotectedgroupwhentwoormorecandidatesareequallyqualified.

Welookedattheextenttowhichcompanieswereaddressingtheunder-representationofwomenontheirboardbyencouragingapplicationsfromwomenwithsuitableskillsorexperienceandbylookingtosectorsoutsidetheFTSE350tobroadenthecandidatepool.Wealsolookedatwhethercompaniesweredevelopinginternaltalentwithaviewtoimprovingthegenderbalanceintheexecutivepipeline,andweconsideredcompanies’approachestopositiveaction.

95

Challenges to increasing the representation of women in the candidate poolThedifficultiescompanieshavefacedtryingtoimprovethenumberofwomenontheirboardsreflectsabroaderchallenge–thatofwomenbeingunder-representedinthepoolfromwhichappointmentsaremade.Theunder-representationofwomeninseniorrolesinsomesectorsandinsomebusinessfunctionsshowsthatcompaniesdonotrecruit,retainorpromotewomeninsimilarnumberstomenthroughoutthetalentpipeline.Thismeansthatthepoolofsuitablyqualifiedcandidatesforboardrolesisdisproportionatelymale.

Mostcompaniesidentifiedthelimitedpooloffemalecandidatesorlimitednumberofwomeninthetalentpipelinewiththerequiredskillsandexperienceastheirgreatestchallenge.

‘There aren’t as many females out there with the experience and skill levels as there are men.’ (Companysecretary,FTSE250,1-24%femaleboardrepresentation,male,interviewresponse)

‘The pool of well qualified and available women candidates with relevant skills and experience has proven disappointing.’ (FTSE250,≥25%femaleboardrepresentation,surveyresponse)

Companiesalsoreportedthathistoricallypredominantlymalesectors(forexample,mining,computingandtechnology)founditparticularlyhardtoidentifywomenwiththeappropriateindustryexperience.

Somecompaniestoldusthatthegreatestchallengewasorganisationalculturesthatwerenotopentoattractingadiverseworkforceandwereunlikelytoappealtoordevelopwomen:

96

‘You will get some businesses which have quite an embedded male culture in them. … [P]eople recruit people who are like them, who think like them, who behave like them, and then the organisational structure of the business tends to support the particular culture of the business, and the training and the in-work development of individuals will again tend to conform with the culture of the business.’ (Chairoftheboardandnominationcommittee,FTSE100,≥25%femaleboardrepresentation,interviewresponse)

Companiesalsorecognisedthattheyoftenlosetalentedwomenasaresultof‘lifechoices’,whenwomenexitordowngradetheircareerstobalancetheirworkandfamilylives,orworkpart-timeandthenfindithardtoresumetheircareersafewyearslater.Onecompanycommentedthat‘certainlevelsofmanagement[clash]withcertainaspirationsinlifeatcertainages[and]itdoescreateachallenge.’(Companysecretary,FTSE100,≥25%femaleboardrepresentation,male,interviewresponse).

Executivesearchfirmsalsonotedthatmanywomeninterruptedtheircareersintheirmid-to-latethirties,andsomissedadecisivestageintheircareerdevelopment.

‘…the challenge is to keep those women [in their mid-to-late thirties] in the workplace and give them bigger and bigger roles, and more and more responsibility…so that they, in 10 years, are ready to become CEO…What we’ve seen historically is that we lose those women.’ (Executivesearchfirm,interviewresponse)

Welookedatwhethercompaniesweretakingactiontoaddressthesechallengesandsupportmorewomenintoseniorroleswhichprovidetheskillsandexperiencethatmakeboardrolesmoreachievable.

97

Encouraging applications from women for senior and board appointments41%ofcompaniesreportedthattheyundertookactivitiestoencourageapplicationsfromwomenforseniorlevelorboardappointments.Ofthese,FTSE100companiesweremorelikelythanFTSE250companiestohaveundertakenanyactivities(55%incomparisonto35%;seeFigure9.1).Therewaslittledifferencebetweencompaniesaccordingtotheproportionofwomenontheirboard(seeAnnex4,TableA9.1).

Figure 9.1:Activitiestoencourageapplicationsfromwomenforseniorandboardappointments,byFTSE100andFTSE250

98

Source:FTSEcompanysurvey(2013/14)responsestoQ60:Whenrecruiting,doesyourcompanycarryoutanyspecificactivitiestoencourageapplicationsfromwomenforseniorandboardappointments?

Base:Allrespondents=317,FTSE100=95,FTSE250=218.

Yes - carries out activities to encourage applications from women

No - does not carry out activities to encourage applications from women

0% 20% 40% 60% 80% 100%

% of FTSE companies

FTSE 100

Allorganisations

FTSE 250

52 (54.7%) 43 (45.3%)

131 (41%) 186 (58.7%)

141 (64.7%)77 (35.3%)

Encouraging applications for non-executive director roles

Ofthe131companiesthatsaidtheyundertookactivitiestoincreaseapplicationsfromwomen,77%reliedonanexecutivesearchfirm.Thisoutweighedallotheractivitiescombined(includingimprovinginternalprocessessuchaspolicyortraining,orusingnetworks)(seeAnnex4,TableA9.2).

53%ofcompaniesindicatedthattheyhadexplicitlyaskedforfemalecandidatesinordertoimprovethegendercompositionofaboard.Selectingcandidatesbecausetheyarewomenwouldbeunlawfulasitdiscriminatesagainstmalecandidateswhomaybebetterqualified.Itwouldalsobeunlawfulforacompanytoinstructanexecutivesearchfirmtodiscriminate.Forexample,somecompaniesaskedforawoman,someforall-femalelists,andothersforwomentobeincludedonthelongorshortlists.

‘Recruitment consultant instructed to include, where possible, female candidates on long and shortlists.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Afewcompaniesengagedexecutivesearchfirmswithagoodtrackrecordindiverseappointmentsandthenquestionedtheireffortsifthecandidatelistwasnotdiverse.Inourviewthisapproachhelpscompaniesdelivertheircommitmenttogenderdiversityandencouragesgoodpracticebyexecutivesearchfirms.

‘We engage one of the leading executive search firms which has a strong history of helping clients appoint diverse candidates, both as to gender and culture.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

99

‘Our Board diversity policy and the measurable objectives … are communicated to the executive search firm for implementation during the recruitment process. …Search firms are required to submit a gender diverse shortlist. Where these are not provided, the search firms are required to explain why they were unable to source/attract females’. (FTSE100,≥25%femaleboardrepresentation,surveyresponse)

Companiesalsomentionedtakingactioninternallytoensuretheyhadappointmentprocessesthatsupportedapplicationsfromwomen.Examplesofthisincludehavingapolicyorguidelines,settingtargets,conductingtheirownsearchesorbenchmarkingtheirperformanceagainstothercompanies.Althoughthenumbersweresmall,thiswasmorefrequentlymentionedbyFTSE250thanFTSE100companies(16%comparedto8%).

Afewcompanies(12,or9%)mentionedusingtheirownpersonalorprofessionalnetworksandcontactstoseekoutsuitablefemalecandidates.

Encouraging applications for executive director roles

Fewercompanies(103)describedactivitiestoattractapplicationsfromwomenforexecutivedirectorroles(seeAnnex4,TableA9.3).Companiesmostfrequentlycitedtheuseofexecutivesearchfirmsasthemeanstoattractmorefemaleapplicants(59%).

40%ofcompaniesspecificallyrequestedfemalecandidates(thiswaslowerthanthe53%requestingthesefornon-executiveroles)butasimilarproportionaskedforbroaderdiversity(17%).

Forexecutivedirectorroles,companiesweremorelikelytoreportdevelopingfemalecandidatesinternallyaspartoftraining,mentoringorsuccessionplanning.FTSE100companiesreportedthismoreoftenthanFTSE250companies(34%and14%respectively).15%ofcompaniessaidtheywereaddressingandimprovinginternalprocessestoencouragefemaleapplicants.

Onlyfivecompaniesindicatedthattheyusednetworksforexecutiveappointments.Thesamenumbersuggestedthattheircurrentreputationwouldbeanincentiveforapplicants.

100

Widening the candidate pool beyond the FTSE 350Toaddresstheunder-representationofwomenonboards,companiescantrytowidenthepoolofpotentialcandidatesbyencouragingapplicationsfromwomenwithrelevantexperiencebutbackgroundsindifferentsectors.

Ourdatasuggeststhatcompaniesthatseeksuitablyqualifiedcandidatesfromawidercandidatepoolareabletoincreasethelikelihoodofappointingawomantotheirboard.

39%ofallcompanieshadmadeanappointmentfromsectorsoutsidetheFTSE350,suchasthenot-for-profitsector,academia,thepublicsectorortheprofessions(seeAnnex4,FigureA9.1).Womenmadeup55%ofnon-executiveand33%ofexecutiveappointmentswithabackgroundoutsidetheFTSE350.TherewaslittledifferencebetweenFTSE100andFTSE250companiesintheproportionofappointmentsofpeoplewithanon-FTSE350background(seeAnnex4,TableA9.4).

However,ahigherproportionofcompanieswith25%ormoreand1-24%womenontheirboardsappointednon-executivedirectorsfromoutsidetheFTSE350thancompanieswithnowomenontheirboards(64%,51%and0%respectively).Despitelowernumbersofwomenappointed,thepatternwassimilarforexecutivedirectors(39%,32%and0%respectively)(seeFigures9.2and9.3).

101

Figure 9.2:Non-executivedirectorappointmentsmadefromoutsidetheFTSE350,bygenderofappointmentandproportionofwomenontheboard

Source:FTSEcompanysurvey(2013/14)responsestoQ66:Ifyourappointmentsincludepeoplefromthenot-for-profitsector,thepublicsector,academia,theprofessionsorcompaniesfromoutsidetheFTSE350.Pleaseprovidethenumberofsuccessfulappointeesfromeachsectorduringyourcompany’s2012/2013to2013/2014annualreportingperiod.

Notes:FBR=femaleboardrepresentation.NED=non-executivedirector.

Base:Allappointmentsmade(Allrespondents=208,≥25%FBR=80,1-24%FBR=121,0%FBR=7).

102

≥25% FBR0

% o

f all

appo

intm

ents

0

10 10

20 20

30 30

40 40

50 50

60 60

70 70

80 80

90 90

100 100

24

43(64.2%)

1-24% FBR

47

49(51.0%)

0% FBR

5

0(0.0%)

All NEDappointments

76

92(54.8%)

Female Male

Figure 9.3: ExecutivedirectorappointmentsmadefromoutsidetheFTSE350,bygenderofappointmentandproportionofwomenontheboard

Overhalf(53%)ofallexecutiveandnon-executiveappointmentsofindividualswithbackgroundsoutsidetheFTSE350camefromotherprivatecompanies.Afurther25%weredrawntheprofessions(lawandaccountancy).Theremaining22%werefromthepublicsector(9%),thenot-for-profitsector(7%)andacademia(6%).

Thenumbersofmenandwomenwithaprivatecompanyorprofessionalbackgroundweresimilar.Morewomenthanmenwereappointedfromthenot-for-profitsectorandthepublicsector(seeAnnex4,TableA9.5).

Source:FTSEcompanysurvey(2013/14)responsestoQ66:Ifyourappointmentsincludepeoplefromthenot-for-profitsector,thepublicsector,academia,theprofessionsorcompaniesfromoutsidetheFTSE350.Pleaseprovidethenumberofsuccessfulappointeesfromeachsectorduringyourcompany’s2012/2013to2013/2014annualreportingperiod.

Notes:FBR=femaleboardrepresentation.ED=executivedirector.

Base:Allappointmentsmade(Allrespondents=208,≥25%FBR=80,1-24%FBR=121,0%FBR=7).

103

≥25% FBR0

% o

f all

appo

intm

ents

0

10 10

20 20

30 30

40 40

50 50

60 60

70 70

80 80

90 90

100 100

8

5(38.5%)

1-24% FBR

17

8(32.0%)

0% FBR

2

0(0.0%)

All EDappointments

27

13(32.5%)

Female Male

Company views on widening the pool beyond the FTSE 350

TheUKCorporateGovernanceCodestatesthatsufficientdiversityonaboardcanencourageconstructivedebateandhelpavoid‘groupthink’(FRC,2014,p.2).Somecompaniesalsoregardedwideningthecandidatepoolandappointingmorediverseboardmembersasbringingpositivebenefits,rangingfromdifferentperspectivestotechnicalskills:

‘We seek to appoint candidates who will add value to our Board and are agnostic to the sectors in which such candidates have previously worked. The challenge is to produce a well-balanced slate of directors with a range of relevant experience. Prime consideration is diversity of thought and having people coming at issues and decisions from different perspectives.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Othercompanieswereopentoanycandidateswhocouldmeettheskillsrequirementfor aroleanddidnotseebackgroundasanimpediment.TheymentionedthatcandidateswithbackgroundsoutsidetheFTSE350offered‘ablendofskills’,29‘diversityofprofessionalexperience’,30‘internationalandmarketingskills’,31aswellasaccountingskills.Forexample:

‘For many appointments we are looking for experience of our industry and/or experience of running large international businesses … This naturally leads to an emphasis on the ‘for profit’ sector. However this does not preclude others for certain roles, particularly … finance and risk and controls oversight.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

104

29FTSE100,1-24%femaleboardrepresentation,companysurveyresponse.

30FTSE100,1-24%femaleboardrepresentation,companysurveyresponse.

31FTSE100,≥25%femaleboardrepresentation,companysurveyresponse.

However,manycompaniesdidnotregardapplicationsfromoutsidetheFTSE350asaneffectivewayofwideningthecandidatepool.Thesecompaniessaidcandidatesfromothersectorswereunlikelytohavetheappropriateskills,experienceorculturalfittheyrequired.Theysuggestedthatsuchcandidateswouldlackfinancialexperience,experienceofcorporategovernanceandshareholderrelationshipsandknowledgeofanindustry.Somefeltitwasnotcost-effectivetoscreenawiderpoolofcandidatesgiventheirlikelylimitations:

‘I have never worked anywhere that would look to those sectors for possible recruitment, not in any commercial environment. The culture gap is generally too wide.’ (FTSE250,0%femaleboardrepresentation,surveyresponse)

‘They are frequently not literate in accounting, have limited experience of working in teams focused on outputs and have no base established through working their way up through comparable organisations.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

105

Developing the talent pipelineThe most popular activities were:

Considering women for internal promotions at senior management levels(79%)

Offering flexible working and part-time working at senior management levels(75%)

Providing networking opportunities for women(68%)

Providing mentoring and sponsorship programmes for women(61%)

Providing flexible career paths to complement life cycle choices(46%)

‘Financial literacy can be a challenge, as well as lack of experience of managing a P&L32 in a business and lack of experience working in our industry.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

ExecutivesearchfirmstoldusthattheyincludedcandidatesfromoutsidetheFTSE350aspartoftheirstandardpracticeandasawayof‘broadeningthepoolto…identifythecandidateswiththemostrelevantskillsandexperience’foraparticularroleandtoavoid‘recyclingthesamelimitedpoolofcandidates.’(Executivesearchfirm,interviewresponse).Evenso,theyfeltthatinmanycasescandidatesoutsidetheFTSE350wereunlikelytohaveappropriateskillsandexperience:

‘There is something in having experience in a large corporation at a high level that is very hard to replicate if you come from a very small company or very sort of niche company.’(Executivesearchfirm,interviewresponse)

OurevidenceshowsthatcompaniesthathadappointedwomenwithbackgroundsfromoutsidetheFTSE350saidthatthesehigh-calibreindividualsprovidedtheboardwithdifferentperspectivesandrelevantskillsandtechnicalknowledge.ThissuggeststhatseekingsuitablyqualifiedwomeninsectorsoutsidetheFTSE350isawaytoopenupopportunitiestoawiderandmorediverserangeofcandidates,allowingforafairerandmerit-basedrecruitmentprocess.However,somecompanieswerereluctanttoviewitinthislightanddidnotrecognisethepotentialbenefitsitcouldbring.

Developing the female talent pipeline within the company Mostcompaniessaidtheirgreatestchallengetoimprovingboarddiversitywastheunder-representationofwomeninthetalentpipeline.Thishadanimpactontheproportionofwomeninseniormanagementrolesthatmightintimetakeupexecutiveornon-executivedirectorroles.

106

32P&Lreferstotheprofitandlossstatementthatsummarisestherevenues,costsandexpensesincurredduringaspecificperiodoftimeandprovidesinformationaboutacompany’sability,orlackthereof,togenerateprofitbyincreasingrevenue,reducingcosts,orboth.

Company activities to attract and develop women

Figure 9.4:ActivitiesundertakentoattractanddevelopfemaletalentbyFTSE100andFTSE250

Figure9.4showsoftherangeofactivitiesundertakenbycompaniestoattractanddevelopfemaletalentwithintheirorganisation.Themostpopularactivitieswere:

• consideringwomenforinternalpromotionsatseniormanagementlevels(79%)

• offeringflexibleworkingandpart-timeworkingatseniormanagementlevels(75%)

• providingnetworkingopportunitiesforwomen(68%)

• providingmentoringandsponsorshipprogrammesforwomen(61%),and

• providingflexiblecareerpathstocomplementlifecyclechoices(46%).

107

Source:FTSEcompanysurvey(2013/14)responsestoQ63:Toimprovetherepresentationofwomenatseniormanagementandboardlevels,doesyourcompanycarryoutanyofthefollowingactivitiestoattractanddevelopfemaletalentwithinthecompany?Pleaseselectallthatapply.

Notes:PTworking=part-timeworking.

Base:AllrespondentstoQ63=232,FTSE100=83,FTSE250=146,83companiesprovidednoresponse(11fromFTSE100and72fromtheFTSE250).

FTSE 100 FTSE 250 All respondents

0.0%Reserve training places

36%

85%81%

19% 20%

86%

76%

58%

18%

58%

49%

75% 74%

40%

75%

46%

79%

12%16%

61%

68%

14%7%

25%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Networking Mentoring/sponsor

Shadow board

members

Targetadvertising

Internalpromotion

Flexibleand PTworking

Flexiblecareerpaths

FTSE100companiesweremorelikelythanFTSE250companiestoreportprovidingnetworkingopportunities(85%incomparisonwith58%),mentoringprogrammes(81%incomparisonwith49%)andtrainingonboardleadership(36%incomparisonwith18%)forwomen.FTSE100andFTSE250companiesbothofferedflexibleworkingatseniorlevels(76%and74%respectively),butFTSE100weremorelikelytoofferflexiblecareerpathstocomplementlifecyclechoices(58%incomparisonwith40%).

Figure 9.5: Activitiesundertakentoattractanddevelopfemaletalent,byproportionofwomenontheboard

108

Source:FTSEcompanysurvey(2013/14)responsestoQ63:Toimprovetherepresentationofwomenatseniormanagementandboardlevels,doesyourcompanycarryoutanyofthefollowingactivitiestoattractanddevelopfemaletalentwithinthecompany?Pleaseselectallthatapply.

Notes:FBR=femaleboardrepresentation.PTworking=part-timeworking.

Base:AllrespondentstoQ63=232,≥25%FBR=72,1-24%FBR=143,0%FBR=13,unknownFBR=4(excludedfromchart).83companiesprovidednoresponse(27from≥25%FBR,46from1-24%FBR,11from0%FBR).

≥25% FBR 1-24% FBR 0% All respondents

0.0%Reserve training places

28%24%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

25%

72%69%

38%

0%

68% 67%62%

23%

61%

18%14%15%

16%14%

11%8%12%

79%78%

85%79% 79%

74%

54%

75%

53%

43%

31%

46%

Networking Mentoring/sponsor

Shadow board

members

Targetadvertising

Internalpromotion

Flexibleand PTworking

Flexiblecareerpaths

Companieswith25%ormoreor1-24%womenontheirboardsweremorelikelythancompanieswithnowomenontheirboardstoprovidenetworkingopportunities(72%,69%and38%respectively),mentoringopportunities(67%,62%and23%respectively)ortoreservetrainingonboardleadershipcourses(28%,24%and0%respectively)(seeFigure9.5).ThesedifferencesmayreflecttheimpactofearlierscrutinyonFTSE100companiesinmeetingtheDaviesReview25%sectortarget,andeffortsadoptedbythesecompaniestowidenthecandidatepool.

Allcompaniesencouragedwomentoapplyforinternalpromotions,butcompanieswithover25%or1-24%womenontheirboardsweremorelikelythancompanieswithnowomenontheirboardstoofferflexibleworking(79%,74%and54%respectively)orflexiblecareerpaths(53%,43%and31%respectively)thancompanieswithnowomenontheirboards(seeAnnex4,TableA9.6).Althoughfemaleboardrepresentationtellsuslittleabouttheoverallrepresentationofwomenwithinacompany,thewidedifferencesinthelevelofactiontodevelopthefemaletalentpipelinebetweencompanieswithnowomenontheirboardsandothersmaysuggestverydifferentorganisationalculturesandpriorities.Thiswasmoreevidentwhencompaniesdescribedtherationaleandaimsoftheiractivities.

Somecompanies’corporatediversitypolicieshadledtoprogrammestodevelopfemaletalentatdifferentlevelsofthecompany.Thecompanies’commitmenttoimprovingdiversitywasreflectedinoversightbytheexecutiveteamandtheboard.Forexample:

‘Our … Programme is aimed at women working below the senior executive level who have been identified as having the future potential. … We [also] operate a cross Group talent and succession process for the top 300 managers which explicitly includes reviewing and monitoring progress of female talent. This is reviewed at both Executive Board and the Nomination Committee on behalf of the Board. We monitor diversity of participant nominations to senior leadership development programmes, and actively ensure female representation on each course.’ (FTSE250,≥25%femaleboardrepresentation,surveyresponse)

109

Somecompaniesdescribedmanagementandleadershiptrainingprogrammesthatincluded:recruitmentanddevelopmentacrossanemployee’scareerfromentryupwards;highpotentialaccelerationprogrammes;trainingandmentoring;andpersonaldevelopmentplans.Companiessaidtheseprogrammeswereopentomenandwomen,butinsomecases–thoughnotall–theyalsoprovidedspecificfemaleleadershipprogrammestoencouragemorewomenintoseniorroles.Women-specificprogrammessometimesfocusedondevelopingskillstohelpwomenovercomeperceivedhurdlestoself-development:

‘We are currently… implementing… work which will: …provide an in-depth understanding of the issues senior women face; … [g]roup coaching to provide these women with strategies and alternative thought processes and behaviours to assist them in having successful careers …; and to foster an environment in which they can support, mentor and coach each other; [and to] …[p]rovide the board with insight into how they can support these women and set them up for success.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Somecompaniesencouragedseniormanagerstoattendboardmeetingsortoputthemselvesforwardforappointmenttoothercompanyboardsaspartoftheirpersonaldevelopment.

Justonecompanyhadaninitiativetodevelopwomen’soperationalexperiencesothatitwasmoreequivalenttotheirmalepeers:

‘A lateral moves programme for high potential women is being trialled to address the issue of inadequate operational experience for women as a barrier to progression.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

110

Managerial policies to retain women

Companiesalsocanhaveanimpactontheretention,developmentandpromotionofwomenthroughthewaytheymanagethosewhoarepregnantandreturnfrommaternityleave(DepartmentforBusiness,InnovationandSkillsandEHRC,2014),andthewaytheyretainanddevelopwomenwhohavechildren.Theycandothisbyofferingflexibleworkingorflexiblecareerpathsthatmakeallowancesfor,forexample,periodsofpart-timeworkorreducedabilitytotravelduetochildcareneeds.

Manycompaniesoffered(orsaidtheywereplanningtooffer)flexibleworkingpatternsto allemployees,includingatseniormanagementandexecutivelevel.Theyrecognisedthatthisandtheuseoftechnologycouldhelpthemretainstaff,andallowemployees,particularlywomen,tomanagetheircaringandworkaspirations:

‘[We]…have developed a range of flexible working options to help us both recruit and retain a broader range of staff. … [Our] staff survey shows in its results that a culture is developing which embraces women and means they want to stay.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

Afewcompaniessaidtheyhadprojectstoretainwomenwhoreturnedtoworkaftermaternityorsharedparentalleave:

‘[We have] a career continuity initiative …providing support to women during maternity leave, with the objective of retaining and supporting women as they “step off” and “step on” their career.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

111

Companies’ understanding of positive action Somecompanieshadlinkedtheircorporatediversitypoliciestoprogrammestodevelopwomeninordertoremedytheirunder-representationordisadvantageinthepipeline.However,ourevidencesuggeststhatmanyareuncertainofhowtousepositiveaction.

Somecompaniesbelievedthatanequalopportunityapproachrequiredthemtooffermenandwomenexactlythesamedevelopmentopportunities,andthatopeningspecificopportunitiestoprotectedgroupswouldunderminemerit-basedrecruitment.

‘[We offer] nothing specifically aimed at women, we are an equal opportunities employer.’(FTSE250,1-24%femaleboardrepresentation,surveyresponse)

‘We recruit based on merit and do not positively discriminate.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

‘As a member of the senior management team in the Group, I would be very concerned to think I had been appointed to “quota” feed. I would find it patronising as would my female colleagues. The women in the Group at every level are appointed because they are the best candidates for the job and do not need assisting in meeting their ambitions or career aims.’ (FTSE250,1-24%femaleboardrepresentation,surveyresponse)

112

Afewcompaniesthoughtthatthepositiveactionprovisionswerenotapplicabletothem.Otherswereunclearwhenactivitiestoencourageanddevelopwomenwerelawful,orwereresistanttousingthembecauseofconcernsaboutfairnessandmerit.

Somecompaniessaidthepositiveaction‘tie-breakprovision’wasimpracticalasselectionwasalwaysbasedonmerit:

‘We do not build the positive action provision into our processes as it is our belief that, especially at such senior levels, the chance of two candidates being equally suitable in terms of knowledge, perspectives, experiences and style is unlikely to ever occur. We are committed to achieving gender balance at the very top of our organisation whilst also employing the best person for the job.’ (FTSE100,≥25%femaleboardrepresentation,surveyresponse)

Somecompaniesdescribedactivitiesthatdidnotmeetthecriteriaforpositiveactionandwerepotentiallyunlawful:

‘As females are under-represented on the Board it is legal to positively discriminate in recruitment, hence our requests for female candidates to executive search firms.’ (FTSE100,1-24%femaleboardrepresentation,surveyresponse)

113

Conclusions Companiesandexecutivesearchfirmssaidthelimitedpoolofsuitablyqualifiedfemalecandidateswastheirgreatestchallengetoimprovingtheproportionofwomenonboards.Yetmostcompanieshadreliedontellingtheirexecutivesearchfirmtoincludewomenonthecandidatelistastheonlyactiontoencourageapplicationsfromthem.

MostcompanieshadnotlookedmorewidelyatsectorsoutsidetheFTSE350towidenthepoolofcandidates.Thiswasdespiteevidencethatthishadproventobeasuccessfulstrategytoincreasediversityanddifferentperspectivesontheboard,andappointeesalsohadtechnicalskillsorexpertiserelevanttothebusiness.

Fewcompaniesreportedtakingpositiveactionorunderstoodhowtheycoulduseittotackletheunder-representationofwomenontheirboardorintheirtalentpipeline.Someofferedmentoring,boardleadershiptrainingandnetworkingtoencouragewomentoapplyforboardroles.Theseapproachesweremoreevidentincompanieswithmorewomenontheirboards,possiblyreflectingtheimpactofscrutinyoncompaniesinmeetingtheDaviesReview25%target.Somecompaniesofferedspecificprogrammestowomentodeveloptheirleadershippotentialwherewomenwereunder-representedatseniorlevels,butfewrealisedthiswasaformofpositiveaction.

Companiesalsoofferedflexibleworkingand,toalesserextent,flexiblecareerpathsandpoliciesandprogrammestoencourageretentionofwomenwithcaringresponsibilities.

Werecommendthatcompaniestakethefollowingactionstowidenthecandidatepoolanddevelopthetalentpipelineforseniormanagementandboardroles:

• Encouragetheexecutivesearchfirmtoidentifywaysofattractingmoreapplicationsfromwomenandquestionthefirmaboutitseffortsifthecandidatelistisnotdiverse.

• WidenthecandidatepoolforboardrolesbyconsideringsuitablyqualifiedindividualsfromoutsidetheFTSE350,suchastheprofessions,thenot-for-profitandpublicsectors,andacademia.

• Usepositiveactionmeasurestoencourageindividualsfromunder-representedgroupstoapplyforrolesortohelpthemgainskillswhichwillenablethemtocompeteonmeritonequalfootingwithothers,suchastraining,developmentandleadershipprogrammes,mentoring,andnetworkingopportunities.

• Usethetie-breakprovisiontoselectacandidatefromanunder-representedgroupwheretherearetwoormorecandidateswhoareequallyqualified.

• Adoptmanagementpracticesthatsupportwomen’sretention,suchasimprovedmanagementofwomenwhoarepregnantorreturnfrommaternityleave,flexibleworking,andflexiblecareerpaths.

114

115

References Brown, S., Kelan, E. and Humbert, A. L. (2015), ‘Opening the Black Box of Board Appointments: Women’s and Men’s Routes to the Boardroom’.Availableat:http://30percentclub.org/assets/uploads/UK/Research/opening_the_black_box_of_board_appointments.pdf[accessed:18March2016]

Department for Business, Innovation and Skills (2011), ‘Women on Boards’. Availableat:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf[accessed:1March2016]

Department for Business, Innovation and Skills (2013), ‘Women on Boards’. Availableat:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/182602/bis-13-p135-women-on-boards-2013.pdf[accessed:1March2016]

Department for Business, Innovation and Skills (2014), ‘The Fourth Work-Life Balance Employer Survey 2013’ (BIS Research Paper 184).Availableat: https://www.gov.uk/government/publications/fourth-work-life-balance-employer-survey-2013[accessed:18March2016]

Department for Business, Innovation and Skills (2015), ‘Improving the Gender Balance on British Boards: Women on Boards Davies Review Five Year Summary’. Availableat:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/482059/BIS-15-585-women-on-boards-davies-review-5-year-summary-october-2015.pdf[accessed:1March2016]

Department for Business, Innovation and Skills and EHRC (2015), ‘Pregnancy and Maternity-Related Discrimination and Disadvantage, First Findings: Surveys of Employers and Mothers’ (BIS Research Paper 235).Availableat: http://www.equalityhumanrights.com/publication/pregnancy-and-maternity-related-discrimination-and-disadvantage-first-findings-surveys-employers-and-0[accessed:18March2016]

Department of Trade and Industry (2003), ‘The Tyson Report on the Recruitment and Development of Non-Executive Directors’.Availableat:http://facultyresearch.london.edu/docs/TysonReport.pdf[accessed:3March2016]

http://30percentclub.org/assets/uploads/UK/Research/opening_the_black_box_of_board_appointments.pdf

http://30percentclub.org/assets/uploads/UK/Research/opening_the_black_box_of_board_appointments.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/182602/bis-13-p135-women-on-boards-2013.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/182602/bis-13-p135-women-on-boards-2013.pdf

https://www.gov.uk/government/publications/fourth-work-life-balance-employersurvey-2013

https://www.gov.uk/government/publications/fourth-work-life-balance-employersurvey-2013

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/482059/BIS-15-585-women-on-boards-davies-review-5-year-summary-october-2015.pdf



http://facultyresearch.london.edu/docs/TysonReport.pdf

http://facultyresearch.london.edu/docs/TysonReport.pdf

http://www.equalityhumanrights.com/publication/pregnancy-and-maternity-relateddiscrimination-and-disadvantage-first-findings-surveys-employers-and-0

http://www.equalityhumanrights.com/publication/pregnancy-and-maternity-relateddiscrimination-and-disadvantage-first-findings-surveys-employers-and-0

Financial Reporting Council (2014), The UK Corporate Governance Code.Availableat:https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf[accessed:1March2016]

Green Park Interim & Executive Search (2015), ‘The Green Park Leadership 10,000: Spring 2015’.Availableat:http://www.green-park.co.uk/widening-diversity-deficit-threatens-britains-competitiveness[accessed:18March2016]

Higgs (2003), ‘Review of the role and effectiveness of non-executive directors’. Availableat:http://webarchive.nationalarchives.gov.uk/20121212135622/http://www.bis.gov.uk/files/file23012.pdf[accessed:18March2016]

Korn Ferry Institute (2015), ‘The Class of 2014: New NEDs in the FTSE 350’. Availableat:http://static.kornferry.com/media/sidebar_downloads/Class%20of%202014_New%20NEDs%20in%20the%20FTSE350.pdf[accessed:18March2016]

London Stock Exchange (2012), ‘Corporate Governance for Main Market and Aim Companies’.Availableat:http://passthrough.fw-notify.net/download/626756/http://www.londonstockexchange.com/companies-and-advisors/aim/publications/documents/corpgov.pdf[accessed:18March2016]

McKinsey & Company (2007), ‘Women Matter: Gender diversity, a corporate performance driver’.Availableat:http://www.raeng.org.uk/publications/other/women-matter-oct-2007[accessed:1March2016].

ONS (2001), Labour Force Survey Employment status by occupation, April to June 2001 [dataset]. [cited 25 January 2016].Availableat:http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentbyoccupationemp04[accessed:1March2016]

ONS (2001–2014), Annual Population Survey January–December 2001–2014 [datasets]. [cited 25 January 2016].Availableat:https://www.nomisweb.co.uk/articles/873.aspx[accessed:3March2016]

ONS (2015), Labour Force Survey Employment status by occupation, April to June 2015 [dataset]. [cited 25 January 2016].Availableat:http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentbyoccupationemp04[accessed:1March2016]

116

https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

http://www.green-park.co.uk/widening-diversity-deficitthreatens-britains-competitiveness

http://www.green-park.co.uk/widening-diversity-deficitthreatens-britains-competitiveness

http://webarchive.nationalarchives.gov.uk/20121212135622/http://www.bis.gov.uk/files/file23012.pdf

http://webarchive.nationalarchives.gov.uk/20121212135622/http://www.bis.gov.uk/files/file23012.pdf

http://static.kornferry.com/media/sidebar_downloads/Class%20of%202014_New%20NEDs%20in%20the%20FTSE350.pdf

http://static.kornferry.com/media/sidebar_downloads/Class%20of%202014_New%20NEDs%20in%20the%20FTSE350.pdf

http://passthrough.fw-notify.net/download/626756/http://www.londonstockexchange.com/companies-and-advisors/aim/publications/documents/corpgov.pdf



http://www.raeng.org.uk/publications/other/womenmatter-oct-2007

http://www.raeng.org.uk/publications/other/womenmatter-oct-2007

http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/employmentbyoccupationemp04



https://www.nomisweb.co.uk/articles/873.aspx

https://www.nomisweb.co.uk/articles/873.aspx




117

Annex 1: Terms of reference for the inquiry TheEqualityandHumanRightsCommissionwillexaminehowFTSE350companiescarryoutrecruitmentandmakedecisionsonsuitabilityforboarddirectorrolesinlightoftheprovisionsoftheEqualityAct2010andtheFinancialReportingCouncil’sCorporateCodeofGovernance(asamendedSeptember2012).TheCommissionwill:

• useevidenceofappointmentsmadeinthepast12monthstoexaminehowtheFTSE350listedcompaniesandtheiragentsmakedecisionsabouttheappointmentofboarddirectorsincludingexaminingthekeydecisionpointsandtherolesandpracticesofdecisionmakersandtheiragentsthroughouttheprocess

• examinewhetherthoserecruitmentpracticesaretransparentandfairandresultinselectionbasedonmerit,and

• identifywhereimprovementstorecruitmentpracticeareneededtoensurerecruitmentpracticesutilisetobesteffecttheprovisionsoftheEqualityAct2010,andtheequalityrequirementsintheFinancialReportingCouncil’sCorporateCodeofGovernance(asamendedSeptember2012)withtheaimofachievingbetterrepresentationofwomenatboardlevel.

Definitions FortheavoidanceofdoubtwehavedefinedFTSE350companiesasthosecompanieslistedontheLondonStockExchangewebsiteon24July2014.

ThisinquiryisconductedinaccordancewithSchedule2totheEqualityAct2006theeffectofwhichis:

a. torequiretheCommissiontopublishthetermsofreferenceoftheinquiryandgivenoticeofthemtoanypersonstheyspecify(paragraph2)

b. torequiretheCommissiontomakearrangementstogivepersons,particularlythosespecifiedinthetermsofreference,theopportunitytomakerepresentations(paragraph6)

c. toempowertheCommissiontoserveanoticeonanypersonororganisationrequiringtheproductionofinformation,documentsorevidenceintheirpossession(paragraphs9and10)

d. torequiretheCommissiontoreportontheinquiry’sfindings(paragraph15),and

e. toempowertheCommissiontoaddressrecommendationstoanyparty(paragraph16).

Annex 2: Methodology – inquiry evidence-gathering and analysisIntroductionTheCommissionlauncheditsinquiryon23July2014.Thisreportisbasedonquantitativeandqualitativeevidencecollectedspecificallyfortheinquiry.ThequantitativeevidenceisbasedonasurveyofappointmentpracticesbyFTSE350companiesandasimilarsurveyofexecutivesearchfirms.ThequalitativeevidenceisbasedoninterviewswithrepresentativesfromFTSE350companies,executivesearchfirmsandcandidates,aswellasanalysisofdocumentsprovidedbyFTSE350companiesandexecutivesearchfirms.

WecommissionedMatrixInsightLtd(anindependentresearchconsultancy)on13October2014toprepareallsamplesandresearchtools,andtocarryoutthefieldworkandbasicanalysisofallsources.

Thefollowingsectionsdescribeeachofthesesources. ThesurveyinstrumentsandinterviewguidesareavailableontheCommission’s websiteatwww.equalityhumanrights.com/womenonboards.

FTSE 350 company surveyThissurveyaskedFTSE350companiestoprovideinformationaboutappointmentsmadeinthe12monthsprecedingthelaunchofourinquiry,thatisbetween2012/13and2013/14.ChangeswithinFTSE350companiesovertimemeantthatthesurveycapturedresponsesfromfourcompanieswhichwerenolongerintheFTSE350atthetimeofthesurvey,buttheywereatthepointofthesample.33

ThesurveyquestionnairewasdevelopedbytheCommission,apanelofexpertsandthestudyteam,andthenpilotedwithaselectionoffieldexperts,includingsomeprofessionalservicescompanies,theDepartmentforBusiness,InnovationandSkills,andtheGovernmentEqualitiesOffice.

WesentoutinvitationstotakepartintheSurveyMonkeysurveybyemailon8January2015,withaclosingdateof6February2015.Theinvitationincludedalinktothesurvey,aPDFcopyofthesurveyandinstructions.Responsesweremadeonlineandadditionaldocumentationreturnedbyemail.

118

33Onecompanywasde-listedandthreemovedtotheFTSESmallCapIndex.

TheCommissionwrotetoalltheFTSE350companieson3February2015toclarifypracticalissuesraisedbysomerespondents.On18March2015theCommissioncontactedallcompaniesbylettertoensuretheyhadreceivedthedocumentation.Wealsocontactedcompaniesbytelephonethatthusfarhadfailedtoreplytoensuretheyhadtheopportunitytodoso.Weextendedthesurveydeadlinetoallowforthisanditclosedon19May2015.

Wereceivedresponsesfrom317companiesandstoredthedatainanExcelfile.WecarriedoutbasicstatisticalanalysisinExcel,withadditionallogisticregressionanalysisusingGeneralisedEstimatingEquations.34

Open-endedresponsequestionswhichcontainedwrite-inanswerswerecodedandanalysedusingNvivo10,andlatermanuallyqualitychecked.

Weuse‘FTSEcompanysurvey’wherewerefertodatafromthissourceinthereportandindicatetowhichperiodthedatarefers(2012/13or2013/14),assomequestionsrequiredbothtobeprovidedtoenableustolookatchangebetween2013and2014.

Findingsthatrefertoallcompaniesor‘allrespondents’wherethebaseis317companieswillincludethefindingsfromthefourcompaniesnolongerintheFTSE350.IffindingsarepresentedasfromtheFTSE350,FTSE250orFTSE100theyexcludetheresponsesfromthefourcompanieswhoseresponseindicatedtheywerenolongerinthoseIndices.

Executive search firm surveyThissurveyaskedexecutivesearchfirmstoprovideinformationabouttheirinvolvementinappointmentsmadeinthe12monthsprecedingthelaunchofourinquiry,thatisbetween2012/13and2013/14.Initiallyweidentified64executivesearchfirms,allofwhomweresignatoriesoftheVoluntaryCodeofConductforExecutiveSearchFirms,toreceivethesurvey.Twenty-sixfirmswereidentifiedasbeingexemptbecausetheyhadnotbeeninvolvedinFTSE350boardappointmentsduringtheperiod,leaving38inscopeofthesurvey.

ThesurveyquestionnairewasdevelopedbytheCommission,apanelofexpertsandthestudyteam,andthenpilotedwithaselectionoffieldexperts,asabove.

WesentoutinvitationstotakepartintheSurveyMonkeysurveybyemailon8January82015,withaclosingdateof6February2015.Theinvitationincludedalinktothesurvey,aPDFcopyofthesurveyandinstructions.Responsesweremadeonlineandadditionaldocumentationreturnedbyemail.

34Astatisticalprocedureforanalysingdatawheretherearetwopossibleoutcomes.Inthiscase,eachpostcanbeheldbyamanorwoman,whichallowsforcorrelationbetweenclustersofobservations,inthiscasebetweendirectorshipswithinthesamecompany.

119

TheCommissionwrotetoallexecutivesearchfirmson3February2015toclarifypracticalissuesraisedbysomerespondents.Wealsocontactedcompaniesthatthusfarhadfailedtoreplytoensuretheyhadtheopportunitytodoso.Weextendedthesurveydeadlinetoallowforlaterespondersanditclosedon29May2015.

Wereceivedresponsesfrom28executivesearchfirmsandstoredthedatainanExcelfile.WecarriedoutbasicstatisticalanalysisinExcel.Open-endedresponsequestionswhichcontainedwrite-inanswerswerecodedandanalysedusingNvivo10,andlatermanuallyqualitychecked.

Weuse‘Executivesearchfirmsurvey’wherewerefertodatafromthissourceinthereport.

FTSE 350 company interviewsMatrixInsightLtdcarriedoutinterviewsbetweenMarchandJune2015withasampleof25individualswhowereeitheranominationcommitteechair,companychairorcompanysecretaryinaFTSE350company.ThesampleincludedcompaniesfromtheFTSE100and250,13differentsectors,andfromcompanieswith25%ormore,1-24%,ornowomenontheirboards.

InterviewswerecarriedoutusinganinterviewguidedevelopedbytheinquiryteamandrecordedusingWebEx,anonlineaudioconferencingsystem.

Transcriptswereuploaded,codedandanalysedusingNvivo10.

Executive search firm interviewsMatrixInsightLtdconductedinterviewsfromMarchtoApril2015withasampleof15executivesearchfirmsthatweresignatoriesoftheVoluntaryorEnhancedVoluntaryCodeofConductforExecutiveSearchFirms.

Interviewswerecarriedoutusingasemi-structuredinterviewguideandrecordedusingWebEx,anonlineaudioconferencingsystem.Transcriptswereuploaded,codedandanalysedusingNvivo10.

120

Candidate interviewsMatrixInsightLtdcarriedoutinterviewsbetweenJanuaryandJune2015withasampleof17candidateswhohadappliedforexecutiveornon-executivedirectorpostsavailablefromJuly2013toJuly2014.Maleandfemale,successfulandunsuccessfulcandidateswererecruitedusingasnowballapproach,andfollowingcontactsfromprofessionalandpersonalnetworks,executivesearchfirms,recentlyappointedcandidatesandsocialmedia.

Interviewswerecarriedoutusingasemi-structuredinterviewguideandrecordedusingWebEx,anonlineaudioconferencingsystem.Transcriptswereuploaded,codedandanalysedusingNvivo10.

Document analysisCompaniesandexecutivesearchfirmssuppliedarangeofdocumentsonavoluntarybasiswhencompletingoneofthequantitativesurveysbetween8January2015and29May2015.

Wedidaninitialanalysisof170documentsreceivedbefore31March2015,uploading,codingandanalysingthemusingNvivo10.

By29May2015wehadreceived231documentsfrom88companies,10executivesearchfirmsandthreecandidates.Ofthe231documents,therewere120executiveandnon-executiveroledescriptions,71diversitypolicies,27companyreportsandthreecandidateselectionnotes.

Wedidfurtheranalysisofnon-executiverolespecifications.Weexcludedroledescriptionsforchairsofboards,auditandremunerationcommittees,andanalysedtheremaining36non-executiveroledescriptionsprovidedby25companies.Theanalysisusedcodingdevelopedintheinitialanalysisandwasqualityassured.

RoundtablesTheCommissionhostedthreeroundtablesessionstodiscussemergingfindingsfromtheinquiry.ThesewereattendedbythechairsofFTSE100andFTSE250companies,companysecretaries,representativesofbusinessorganisationsandexecutivesearchfirms.Theytookplaceon9September2015(FTSEcompaniesandbusinessorganisations)and10September2015(executivesearchfirms).

Thesessionsweretranscribed.

121

Annex 3: FTSE 350 companies and executive search firms who did not respond to the Commission’s survey and those who did respondNon-respondents (FTSE 100)

List of FTSE 100 companies as at 18 July 2014

DixonsCarphoneJohnsonMattheyRandgoldResourcesPlcSportsDirectInternationalPlc

Non-respondents (FTSE 250)


AfrenPlcBHGlobalLtdBHMacroLtdCranswickPlcCSR PlcDCC PlcDominoPrintingSciencesPlcDomino’sPizzaUK&IrelandPlcDSSmithPlcGenesisEmergingMarketsFundGraftonGroupPlcHalfordsGroupPlcImaginationTechnologiesGroupPlcJDWetherspoonPlcJPMorganEmergingMarketsInvestmentTrustPlcMan Group PlcPerformGroupPlcRotork PlcSOCOInternationalPlc

NOTE:AfewFTSEcompaniesaslistedintheFTSE350on18July2014wereexemptedfromrespondingtothesurveyandarenotlisted.

122

Non-respondents (executive search firms) Alpine ExecutiveCornforth ConsultingCT Partners Drax Executive LtdDrayton FinchPage GroupPalm MasonSapphire PartnersWyatt & Jaffe

NOTE: Executive search firms exempted from responding to the survey are not listed.

Respondents (FTSE 100)


3i Group PlcAberdeen Asset Management PlcAdmiral Group PlcAggreko PlcAnglo American PlcAntofagasta PlcARM Holdings PlcAshtead Group PlcAssociated British Foods PlcAstraZeneca PlcAviva PlcBabcock International Group PlcBAE Systems Plc Barclays PlcBG Group BHP Billiton PlcBP PlcBritish American Tobacco PlcBT Group PlcBunzl PlcBurberry Group PlcCapita Plc

123

Carnival PlcCentrica PlcCoca-Cola HBC AGCompass Group PlcCRH PlcDiageo PlcDirect Line Insurance Group PlceasyJet PlcExperian PlcFresnillo PlcG4S PlcGKN PlcGlaxoSmithKline PlcGlencore PlcHammerson PlcHargreaves Lansdown PlcHSBC Holdings PlcIMI PlcImperial Tobacco Group PlcInmarsatInterContinental Hotels GroupInternational Consolidated Airlines Group, S.A.

Intertek Group PlcIntuPropertiesPlcITVPlcJSainsburyPlcKingfisherPlcLandSecuritiesGroupPlcLegal&GeneralGroupPlcLloydsBankPlcLondonStockExchangeGroupMarksandSpencerGroupPlcMeggittPlcMondiPlcNationalGridPlcNextPlcOld Mutual PlcPearsonPersimmonPlcPetrofacServicesLimitedPrudentialPlcReckittBenckiserGroupPlcRELXGroupRioTintoPlcRolls-RoyceHoldingsPlcRoyal Dutch Shell PlcRoyalMailPlcRSAInsuranceGroupPlc

Respondents (FTSE 250)


3iInfrastructurePlcA.G. Barr PlcAberforthSmallerCompaniesTrustPlcAcaciaMiningPlcAlNoorHospitalGroupPlcALENTPlcAllianceTrustPlcAmecFosterWheelerPlcAmlinPlc

AO World PlcAshmoreGroupPlcAVEVAGroupPlcBalfourBeattyPlcBarrattDevelopmentsPlcBBAAviationPlcBeazleyPlcBellwayPlcBerendsenPlc

SABMillerPlcSchrodersPlcSevernTrentPlcShirePlcSky PlcSmith&NephewPlcSmithsGroupPlcSSE PlcSt.James’sPlacePlcStandard Chartered PlcStandardLifePlcTescoPlcTheBritishLandCompanyPlcTheRoyalBankofScotlandGroupPlcThe Sage Group PlcTheWeirGroupPlcTravisPerkinsPlcTUITravelPlcTullowOilPlcUnileverUnitedUtilitiesGroupPlcVodafoneGroupPlcWhitbreadGroupWmMorrisonsPlcWolseleyPlcWPP Plc

124

BetfairGroupPlcBigYellowGroupPlcBlackRockWorldMiningTrustPlcBlueCrestAllBlueFundLimitedBodycote PlcBooker Group PlcBovisHomesGroupPlcBrewinDolphinHoldingsPlcBritPlcBritishEmpireSecurities&GeneralTrustPlcBritvicPlcBTG Plcbwin.partydigitalentertainmentPlcCable&WirelessCommunicationsPlcCairnEnergyPlcCaledoniaInvestmentsPlcCapital&CountiesPropertiesPlcCarillionPlcCentaminPlcCineworldGroupPlcCloseBrothersGroupPlcCobhamPlcColt Group SAComputacenter PlcCountrywidePlcCrestNicholsonHoldingsPlcCrodaInternationalPlcDaejanHoldingsPlcDairyCrestGroupPlcDeLaRuePlcDebenhamsPlcDechraPharmaceuticalsPlcDerwentLondonPlcDignityPlcDiplomaPlcDraxGroupPlcDunelm Group PlcElectraPrivateEquityPlcElectrocomponentsPlcElementisPlcEnQuestPlc

EnterpriseInnsPlcEntertainmentOneLtdEssentraPlcesureGroupPlcEuromoneyINstitutionalINvestorPlcEvrazPlcExovaGroupPlcFennerPlcFerrexpoPlcFidelityChinaSpecialSituationsPlcFidelityEuropeanValuesPlcFidessagroupPlcFirstGroupPlcForeign&ColonialInvestmentTrustPlcFoxtonsGroupPlcGallifordTryPlcGenusPlcGraingerPlcGreatPortlandEstatesPlcGreencore Group PlcGreeneKingPlcHalma PlcHansteenHoldingsPlcHaysPlcHellermannTyton Group PlcHendersonGroupPlcHeritageOilHICLInfrastructureCoLimitedHikmaPharmaceuticalsPlcHiscoxHochschildMiningPlcHomeRetailGroupPlcHomeServePlcHowdenJoineryGroupPlcHuntingPlcICAP PlcIGGroupHoldingsPlcInchcape Plc InfinisEnergyPlcInformaPlcIntermediateCapitalGroupPlcInternationalPersonalFinancePlc

125

InternationalPublicPartnershipsLtdInterservePlcInvestecPlcIP Group PlcITE Group PlcJamesFisherandSonsPlcJardineLloydThompsonGroupPlcJDSportsFashionPlcJohnLaingInfrastructureFundLimitedJohn Wood Group PlcJPMorganAmericanInvestmentTrustPlcJupiterFundManagementPlcJustEatPlcJustRetirementKAZMineralsPlc(formerlynamedKazakhmysPlc)Keller Group PlcKennedyWilsonEuropeRealEstatePlcKierGroupPlcLadbrokesPlcLairdPlcLancashireHoldingsLimitedLondonMetricPropertyPlcLonminPlcMarston’sPlcMelroseIndustriesPlcMERLINENTERTAINMENTSPlcMichaelPageInternationalPlcMicroFocusInternationalPlcMillennium&CopthorneHotelsPlcMitchells&ButlersPlcMitieGroupPlcMoneysupermarket.comGroupPlcMorganAdvancedMaterialsPlcMurrayInternationalTrustPlcN BROWN GROUP PlcNationalExpressGroupPlcNBGlobalFloatingRateIncomeFundNMC Health PlcNorthgate PlcOcado Group PlcOphirEnergyPlc

OxfordInstrumentsPlcPace PlcPayPointPlcPennon Group PlcPerpetualIncomeandGrowthInvestmentTrustPlcPersonalAssetsTrustPlcPetraDiamondsLimitedPetsatHomeGroupPlcPhoenixGroupHoldingsPlaytech PlcPolarCapitalTechnologyTrustPlcPolymetalInternationalPlcPoundland Goup PlcPremierFarnellPlcPremierOilPlcProvidentFinancialPlcPZCussonsPlcQinetiQGroupPlcRathboneBrothersPlcRedefineInternationalPlcRedrowPlcRegusPlcRenishawPlcRentokilInitialPlcRexamPlcRightmovePlcRITCapitalPartnersPlcRiverstoneEnergyLimitedRPC Group PlcRPS Group PlcSavillsPlcScottishMortgageInvestmentTrustPlcSegro PlcSeniorPlcSerco Group PlcShaftesburyPlcSIG PlcSpectrisPlcSpirax-SarcoEngineeringPlcSpirentCommunicationsPlcSt.ModwenPropertiesPlc

126

Stagecoach Group PlcSuperGroup PlcSVGCapitalPlcSynergy Health PlcSynthomer PlcTalk TalkTate&LylePlcTaylorWimpeyPlcTed Baker PlcTelecityGroupPlcTelecomPlusPlcTempleBarInvestmentTrustPlcTempletonEmergingMarketsInvestmentTrustPlcTheBankersInvestmentTrustPlcTheBerkeleyGroupHoldingsPlcTheCityofLondonInvestmentTrustPlcTheEdinburghInvestmentTrustPlcThe Go-Ahead Group PlcTheMercantileInvestmentTrustPlcTheMonksInvestmentTrustPlc

BrookleighServicesLtdBuchananHarveyCNAInternationalpartofPertempsEgonZehnderFidelioPartnersHansonGreenHarveyNashHeidrick&StrugglesInzitoLtdJCA GroupKornFerryLygonGroupMWMConsultingNormanBroadbent

OdgersBerndtsonPerArduaAssociatesLtdRidgewayPartnersLtdRowleyWilliamsLimitedRussellReynoldsAssociatesLtdSocietySpencer StuartStonehavenTheAshtonPartnershipTheCurzonPartnershipLLPTheMilesPartnershipTheZygosPartnershipTrustAssociatesWarrenPartners

Respondents (executive search firms)

TheParagonGroupofCompaniesPlcThe Rank Group PlcTheRestaurantGroupPlcTheScottishInvestmentTrustPlcTheUniteGroupPlcThomasCookGroupPlcTRPropertyInvestmentTrustPlcTullettPrebonPlcUBM PlcUDG Healthcare PlcUKCommercialPropertyTrustLimitedUltraElectronicsHoldingsPlcVedantaResourcesPlcVesuviusPlcVictrexPlcWHSmithPlcWilliamHillPlcWitanInvestmentTrustPlcWorkspaceGroupPlcWorldwideHealthcareTrustPlcWSAtkinsPlc

127

Annex 4: Data tables and additional chartsAdditional charts and supporting tables for Chapter 2: Boards’ performance on gender diversity

Table A2.1:FTSEcompanieswith25%ormorefemaleboardrepresentation

128

Table A2.1: FTSE companies with 25% or more female board representation

Data point (source where

not FTSE company survey)

Met 25% Not met 25% Non-response TOTAL

N % N %

FTSE 350

2012/13 69 19.7 244 69.7 37 350

2013/14 98 28.0 215 61.4 37 350

Oct 2015 (Davies Review) 137 39.1 213 60.9 0 350

FTSE 100

2012/13 28 28.0 67 67.0 5 100

2013/14 37 37.0 58 58.0 5 100


FTSE 250

2012/13 41 16.4 177 70.8 32 250

2013/14 61 24.4 157 62.8 32 250


Source:FTSEcompanysurvey(2012/13and2013/14)andOctober2015fromDaviesReview(2015,p.34).

Notes:2012/13and2013/14dataforFTSE350had313respondentsand37non-respondents,asfourcompaniesrespondedthattheywerenolongerinFTSE350.

Table A2.2:FTSE100andFTSE250companiesmakingappointmentsbetween2012/13and2013/14andtheeffectonthenumberofwomenonboards,bynon-executivedirectorsandexecutivedirectors

129

Table A2.2: FTSE 100 and FTSE 250 companies making appointments between 2012/13 and 2013/14 and the effect on the number of women on boards, by non-executive directors and executive directors

Appointedone or more board

member

Increased women on board

Didn't increase women on

board

N

Row % (making an appt.)

N

Row % (making

an appt.)

NED appointments

FTSE 100 51 36 70.6 15 29.4

FTSE 250 87 63 72.4 24 27.6

All respondents 139 100 71.9 39 28.0

ED appointments

FTSE 100 14 7 50.0 7 50.0

FTSE 250 16 5 31.3 11 68.8

All respondents 30 12 40.0 18 60.0

All appointments (NED/ED combined)

FTSE 100 65 43 66.2 22 33.8

FTSE 250 103 68 66.0 35 33.9

All respondents 169 112 66.3 57 33.7


Notes:NED=non-executivedirectors;ED=executivedirectors.

‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtothesurveyandthereforemaynotsumFTSE100andFTSE250intable.

Table A2.3:Changeinthefemaleboardrepresentation(FBR)ofcompaniesbetween2012/13and2013/14byFTSE100andFTSE250,andfemaleboardrepresentation

Increased FBR Decreased FBR FBR didn’t change Unknown

All companies N

Row % (all

comps)

N (didn’t make

an appt.)

Row % (all

comps) N

Row % (all

comps)

N (didn’t make

an appt.)

Row % (all

comps) N

Row % (all

comps)

Row % (all

comps)

N (didn’t make

an appt.)

Row % (all

comps) N

N (didn’t make an

appt.)

Row % (all

comps)

FTSE 100 53 55.8% 12 12.6% 16 16.8% 2 2.1% 22 23.2% 6 6.3% 4 4.2% 0 0.0% 95

FTSE 250 96 44.0% 29 13.3% 25 11.5% 11 5.0% 82 37.6% 36 16.5% 15 6.9% 10 4.6% 218

25% FBR 56 56.6% 16 16.2% 12 12.1% 5 5.1% 30 30.3% 7 7.1% 1 1.0% 0 0.0% 99

1-24% FBR 94 49.7% 25 13.2% 28 14.8% 8 4.2% 54 28.6% 22 11.6% 13 6.9% 6 3.2% 189

0% FBR 0 0.0% 0 0.0% 1 4.2% 0 0.0% 22 91.7% 14 58.3% 1 4.2% 1 4.2% 24

Unknown FBR 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 5 100.0% 4 80.0% 5

All respondents 150 47.3% 41 12.9% 41 12.9% 13 4.1% 106 33.4% 43 13.6% 20 6.3% 11 3.5% 317


Notes:Thoseidentifiedasnotmakinganappointment(usingresponsestoQ44:Ifyourcompanyhasmadeanon-executiveappointmenttotheboardbetweenits2012/13and2013/14annualreportingperiod,pleasestatethenumberofcandidatesthatparticipatedinthefollowingrecruitmentandappointmentstages.Pleaseprovidenumbersforeachnon-executiveboardappointmentmadewithinthisperiods,andQ52:Ifyourcompanyhasmadeanexecutiveappointmenttotheboardbetweenits2012/13and2013/14annualreportingperiod,pleasestatethenumberofcandidatesthatparticipatedinthefollowingrecruitmentandappointmentstages.Pleaseprovidenumbersforeachexecutiveboardappointmentmadewithinthisperiods.

ThoseidentifiedasnotmakinganappointmentandchangingFBRasaresultofotherboardchanges,suchasappointmentofmenandreductioninboardsize.

‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.

130

Figure A2.1:BoardsizeforFTSE350companiesin2013/14

00

0 0 0 0 0

Board size (combined non-executive directors and executive directors)

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 >15

Not

know

n

No.

of F

TSE

350

boar

ds 61

41

48

40

26 27

16

108 6

97

18


Base:FTSE350companies=317companiesthatrespondedtothesurvey.

131

132

Supporting tables for Chapter 3: Board evaluations Table A3.1:Companiesthathaveevaluatedboardeffectiveness,takingintoaccountthegendercompositionoftheboard,byFTSEIndexandfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ27:Hasyourcompanycarriedoutanevaluationofboardeffectivenessthattakesintoaccountthegendercompositionoftheboard?


Yes - Evaluated board effectiveness

N NRow % Row %

No - Did not evaluate board effectiveness TOTAL

FTSE100 58 61.1 37 38.9 95

FTSE250 137 62.8 81 37.2 218

≥25%FBR 58 58.6 41 41.4 99

1-24%FBR 117 62.2 71 37.8 188

0%FBR 18 75.0 6 25.0 24

Unknown 3 60.0 2 40.0 5

All respondents 197 62.1 120 37.9 317

133

Table A3.2:Companiesthathavecarriedoutaskills/competencyauditoftheirboardwhenconsideringanappointment,byFTSEIndexandfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ29:Inconsideringboardappointments,doesyourcompanycarryouta‘skills/competencyaudit’oftheboardtoidentifyexistingskills/competencygaps?


Yes - considered skills/competency audit

N NRow % Row %

No - not considered skills/competency audit TOTAL

FTSE100 80 84.2 15 15.8 95

FTSE250 176 80.7 42 19.3 218

≥25%FBR 84 84.8 15 15.2 99

1-24%FBR 153 81.0 36 19.0 188

0%FBR 18 75.0 6 25.0 24

Unknown 5 100.0 0 0.0 5

All respondents 260 82.0 57 18.0 317

Table A4.1:Companieswithaboardroomdiversitypolicyandwhetherthatpolicymentionsgenderdiversityorhasagenderobjective/target,byFTSE100andFTSE250,femaleboardrepresentation(FBR)andallrespondents


Notes:TheparticularquestionsaskedforeachsectionofthetablewereQ6:Doesyourcompanyhaveapolicyonboardroomdiversity?,Q9:Doesyourcompany’spolicyonboardroomdiversityspecificallymentiongender?andQ10:Doesyourcompany’spolicyonboardroomdiversityincludeobjectivesortargetsforgenderdiversityintheboardroom?


134

Supporting tables for Chapter 4: Diversity policies and targetss

FTSE100 72 75.8 68 95.8 71.6 35 47.9 36.8 95

FTSE250 168 77.1 158 92.9 72.5 59 34.5 27.1 218

≥25%FBR 73 73.7 68 93.2 68.7 31 41.9 31.3 99

1-24%FBR 148 78.3 139 93.3 73.5 53 35.1 28.0 189

0%FBR 18 75.0 18 100.0 75.0 8 44.4 33.3 24

Unknown FBR

3 60.0 3 100.0 60.0 2 66.7 40.0 5

All respondents 242 76.3 228 93.8 71.9 94 38.2 29.7 317

N N NRow % (of all

companies)

Row % (of boardroom

policies)

Row % (of boardroom

policies)

Row % (of all

companies)

Row % (of all

companies)

Have boardroom diversity policy (Q6)

Boardroom diversity policy mentions gender (Q9)

Boardroom diversity policy has gender diversity objective/targets (Q10)

TOTAL

Target value FTSE 100 FTSE 250 All respondents

Table A4.2:Companiesthathavecarriedoutaskills/competencyauditoftheirboardwhenconsideringanappointment,byFTSEIndexandfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ13:Whatisyourcompany’sboardroomgenderdiversitytarget/objective?


<20% 0 8 8

(%ofthosewithtargets) 0.0 13.3 8.4

(%ofthosewithatargetvalue) 0.0 17.4 10.5

20%<25% 5 8 13



25% 22 25 47



>25% (either 30% or 33.33%) 3 5 8



Total (with target value) 30 46 80

(%ofallrespondents) 31.5 21.1 25.2

No detail provided 5 14 15


(%ofthosewithatargetvalue) - - -

Total (with targets) 35 60 95

(%ofallrespondents) 36.8 27.5 30.0

Total (all respondents) 95 218 317

135

Table A4.3:Companieswithaseniormanagementdiversitypolicyandwhetherthatpolicymentionsgenderdiversityorhasagenderobjective/target,byFTSE100andFTSE250,femaleboardrepresentation(FBR)andallrespondents


Notes:TheparticularquestionsaskedwereQ17:Doesyourcompanyhaveapolicytoincreasediversityatseniormanagement/executivelevel?,Q20:Doesyourcompany’spolicytoincreasediversityatseniormanagement/executivelevelspecificallymentiongender?andQ21:Doesyourcompany’spolicytoincreasediversityatseniormanagement/executivelevelincludeobjectivesortargetsforgender?


Investmentsectorexcludedastherewerenoseniormanagementpositions.

136

FTSE100 54 56.8 49 90.7 51.2 26 48.1 27.4 95

FTSE250 77 41.6 63 81.8 34.1 25 32.5 13.5 185

≥25%FBR 45 52.9 41 91.1 48.2 23 51.1 27.1 85

1-24%FBR 78 44.3 64 82.1 36.4 24 30.8 13.7 176

0%FBR 6 35.3 5 83.3 29.4 3 50.0 17.6 17

Unknown FBR

3 50.0 3 100.0 50.0 1 33.3 16.7 6

All respondents

132 46.5 113 85.0 39.8 51 37.8 17.9 284

N N NRow % (of all

companies)

Row % (of boardroom

policies)

Row % (of boardroom

policies)

Row % (of all

companies)

Row % (of all

companies)

Have senior management diversity

policy (Q17)

Senior management diversity policy mentions gender (Q20)

Senior management diversity policy has gender diversity objective/targets (Q21)

TOTAL

Target value FTSE 100 FTSE 250 All respondents

Table A4.4:Companieswithseniormanagementdiversitytargetsandatargetvalue,byFTSE100,FTSE250andallrespondents


Notes:TheparticularquestionaskedwasQ24:Whatisyourcompany’sseniormanagement/executivelevelgenderdiversitytarget/objective?


<20% 0 2 2



20%<25% 2 1 3



25% 3 3 6



>25% (either 30 or 33.33%) 14 4 18



Total (with target value) 19 10 29

(%ofallrespondents) - - -

No detail provided 6 0 6


(%ofthosewithatargetvalue) - - -

Total (with targets) 25 10 35

(%ofallrespondents) 26.3% 4.6 11.0

Withouttargets 70 - -

Total (all respondents) 95 218 317

137

138

Supporting tables for Chapter 6: The search process Table A6.1:FTSEcompaniesusingexecutivesearchfirms(ESFs)intheirboardappointmentprocess,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ33:Doesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentofdirectorstotheboard?


Use ESFs

N NRow % (allcompanies)

Row % (allcompanies)

Do not use ESFsAll

companies

FTSE100 91 95.8 4 4.2 95

FTSE250 193 88.5 25 11.5 218

≥25%FBR 94 94.9 5 5.1 3

1-24%FBR 171 90.5 18 9.5 1

0%FBR 17 70.8 7 29.2 24

Unknown 5 100.0 0 0.0 5

All respondents 287 90.5 30 9.5 317

139

Table A6.2:Frequencyofuseofexecutivesearchfirms(ESFs)toassistinthenon-executivedirector(NED)recruitmentandappointmentprocess,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionsaskedwereQ33:Doesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentofdirectorstotheboard?andQ34:Foreachtypeofboarddirector,howoftendoesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentprocess?


Do not use Use

Rarely to frequently Always All use

N NN NRow % Row %

TOTALRow % (who use)

Row % (who use)

FTSE100 6 6.3 20 22.5 69 77.5 89 93.7 95

FTSE250 33 15.1 48 25.9 137 74.1 185 84.9 218

≥25%FBR 9 9.1 21 23.3 69 76.7 90 90.9 99

1-24%FBR 22 11.6 43 25.7 124 74.3 167 88.4 189

0%FBR 8 33.3 5 31.3 11 68.8 16 66.7 24

UnknownFBR 0 0.0 1 25.0 3 75.0 4 80.0 5

All respondents 40 12.6 70 25.3 207 74.7 277 87.4 317

140

Table A6.3:Frequencyofuseofexecutivesearchfirms(ESFs)toassistintheexecutivedirector(ED)recruitmentandappointmentprocess,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionsaskedwereQ33:Doesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentofdirectorstotheboard?andQ34:Foreachtypeofboarddirector,howoftendoesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentprocess?


Do not use Use

Rarely to frequently Always All use

N NN NRow % Row %

TOTALRow % (who use)

Row % (who use)

FTSE100 15 15.8 32 40.0 48 60.0 80 84.2 95

FTSE250 76 34.9 42 29.6 100 70.4 142 65.1 218

≥25%FBR 26 26.3 27 37.0 46 63.0 73 73.7 99

1-24%FBR 52 27.5 42 30.7 95 69.3 137 72.5 189

0%FBR 12 50.0 5 41.7 7 58.3 12 50.0 24

UnknownFBR 0 0.0 2 66.6 1 33.3 3 60.0 5

All respondents 92 29.0 76 33.8 149 66.2 225 71.0 317

141

Table A6.4:Impactofuseofexecutivesearchfirms(ESFs)andrequirementforvoluntarycodeofconduct(VCC)onpercentageoffemalenon-executivedirectors(NEDs)onboards


Notes:TheparticularquestionsaskedwereQ34:Foreachtypeofboarddirector,howoftendoesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentprocess?(non-executiveboarddirectors)andQ35:DoesyourcompanyrequireitsexecutivesearchfirmstobeasignatoryoftheVoluntaryCodeofConductforExecutiveSearchFirms?

Analysedusingthegeneralisedestimatingequationmethodology–seeAnnex2:Methodology-inquiryevidence-gatheringandanalysis.

Base:Allrespondents=311.

Do not use ESFs

Use ESFs, do not

require VCC

Use ESFs and require

VCC

FemaleNEDs 24 156 226

MaleNEDs 144 623 778

Total NEDs 168 779 1004

%femaleNEDs 14.3 20.0 22.5

No.companies 27 122 150

FemaleNEDs 35 200 281

MaleNEDs 156 653 754

Total NEDs 191 853 1035

%femaleNEDs 18.3 23.4 27.1


2012/13

2013/14

142

Table A6.5:Impactofuseofexecutivesearchfirms(ESFs)andrequirementforvoluntarycodeofconduct(VCC)onpercentageofwomenexecutivedirectors(EDs)onboards


Notes:TheparticularquestionsaskedwereQ34:Foreachtypeofboarddirector,howoftendoesyourcompanyemployexecutivesearchfirmstoassistintherecruitmentandappointmentprocess?(executiveboarddirectors)andQ35:DoesyourcompanyrequireitsexecutivesearchfirmstobeasignatoryoftheVoluntaryCodeofConductforExecutiveSearchFirms?

Analysedusingthegeneralisedestimatingequationmethodology–seeAnnex2:Methodology-inquiryevidence-gatheringandanalysis

Base:Allrespondents=277.

Do not use ESFs

Use ESFs, do not

require VCC

Use ESFs, and require

VCC

FemaleEDs 1 22 20

MaleEDs 46 285 408

Total EDs 47 307 428

%femaleEDs 2.1 7.2 4.7


FemaleEDs 2 27 20

MaleEEDs 46 275 409

Total NEDs 48 302 429

%femaleNEDs 4.2 8.9 4.7


2012/13

2013/14

143

Table A6.6:Requirementforexecutivesearchfirms(ESFs)tobesignatoriesofthevoluntarycodeofconduct(VCC)byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ35:DoesyourcompanyrequireitsexecutivesearchfirmstobeasignatoryoftheVoluntaryCodeofConductforExecutiveSearchFirms?


ESFs required to be a signatory of the VCR

N NRow % (of companies using ESFs)

Row % (of companies using ESFs)

ESFs not required to be a signatory of the VCR

All using ESFs

FTSE100 56 60.9 36 39.1 92

FTSE250 101 52.3 92 47.7 193

≥25%FBR 44 46.8 50 53.2 94

1-24%FBR 106 61.6 66 38.4 172

0%FBR 5 29.4 12 70.6 17

UnknownFBR 3 60.0 2 40.0 5

All respondents 158 54.9 130 45.0 288

144

Table A6.7:Executivesearchfirms’useofapproachestoimprovegenderdiversity

Source:Executivesearchfirmsurvey(2013/14).

Notes:TheparticularquestionsaskedwereQ6:DoesyourorganisationhaveapolicytoimprovegenderdiversityintheFTSE350boardrecruitmentexercisesitundertakes?,Q8:DoesyourorganisationhavemeasurableobjectivesforimprovinggenderdiversityintheFTSE350boardrecruitmentexercisesitundertakes?andQ10:DoesyourorganisationpubliclyexpressitscommitmenttoincreasinggenderdiversityintheFTSE350boardrecruitmentexercisesitundertakes?

Publicly expresses its commitment to increasing

gender diversity

Policy to improve gender

diversity

Measurable objectives

for improving

gender diversity

Have all three

Have two of three

Have only one

N % N % N % N % N % N %

24 88.9 19 70.4 25 92.6 18 66.7 5 18.5 4 14.8

3 11.1 8 29.6 2 7.4 - - - - - -

27 - 27 - 27 - 27 - 27 - 27 -

Yes

No

All responses

145

Table A6.8:FTSEcompaniesusingnetworksofcurrentandrecentboardmemberstoadvertiseboardvacancies,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ32:Foreachtypeofboarddirector,howdoesyourcompanyadvertiseboardvacancies?-Networksofcurrentandrecentboardmembers(includedanswersreferringtonetworksin‘Otherpleasespecify’).


Base:314(3non-response).

Either executive director or non-

executive director appointments


appointments

Executive director

appointments

N N NRow % Row % Row %

All respondents

FTSE100 19 20.0 19 20.0 15 15.7 95

FTSE250 80 37.2 78 36.3 44 20.5 215

≥25%FBR 24 24.5 23 23.5 16 16.3 99

1-24%FBR 61 33.2 59 32.0 34 18.5 184

0%FBR 16 66.7 14 58.3 8 33.3 24

UnknownFBR 1 20.0 1 20.0 1 20.0 5

All respondents 102 32.2 99 31.5 60 19.1 314

146

Table A6.9:FTSEcompaniesusingnetworksofcurrentandrecentexecutiveandnon-executiveboardmembersandwhethertheyuseothermeanstoadvertise,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ32:Foreachtypeofboarddirector,howdoesyourcompanyadvertiseboardvacancies?-Networksofcurrentandrecentboardmembers(includedanswersreferringtonetworksin‘Otherpleasespecify’)alongsideotheroptionsavailable.

ESF=executivesearchfirm.

Base:314(3non-response).

N % of those who use networks

% of all respondentsNon-executive directors

Usenetworks 99 100.0 31.5

ANDdonotadvertise(andnootheractivity) 31 31.3 9.9

ANDindicatednootheractivity 22 22.2 7.0

ANDindicatedotheractivity(mainlyESF) 46 46.5 14.6

Donotusenetworks 208 - 66.2

Noappointmentresponseonly 7 - 2.2

TOTAL 314 - 100.0

Executive directors

Usenetworks 60 100.0 19.1

ANDdonotadvertise(andnootheractivity) 19 31.7 6.1

ANDindicatednootheractivity 9 15.0 2.9

ANDindicatedotheractivity(mainlyESF) 32 53.3 10.2

Donotusenetworks 238 - 75.8

Noappointmentresponseonly 16 - 5.1

TOTAL 314 - 100.0

147

Table A6.10:FTSEcompanies’useofadvertisingforexecutiveandnon-executiveboardvacancies


Notes:TheparticularquestionaskedwasQ32:Foreachtypeofboarddirector,howdoesyourcompanyadvertiseboardvacancies? ESF=executivesearchfirm.

Base:AllFTSEcompaniesrespondingtoQ32=314.

Either executive director or non-

executive director appointments


appointments

Executive director

appointments

N N NColumn % (of All)

Column % (of All)

Column % (of All)

172 54.8 168 53.5 152 51.2

5 1.6 5 1.6 3 1.0

92 29.3 90 28.4 89 30.0

19 6.1 16 5.0 10 3.4

2 0.6 1 0.3 5 1.7

26 8.1 37 11.7 58 19.5

314 314 297

Donotadvertise

Advertise–publically(newspapers,socialmedia,externalcorporatewebsite)

UseESF

Onlyusenetworks

Relyoninternalsuccessionplanning

Nodetailprovidedornoappointment

All respondents

Table A7.1:FTSEcompaniesusingdifferentinterviewtypesintheirnon-executivedirectorappointmentprocess,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)

148

Supporting tables for Chapter 7: Selection

FTSE100 49 51.6 38 40.0 38 40.0 11 11.6 3 3.2 95

FTSE250 132 60.6 104 47.7 73 33.5 27 12.4 7 3.2 218

≥25%FBR 56 56.6 55 55.6 35 35.4 13 13.1 2 2.0 99

1-24%FBR 111 58.7 76 40.2 69 36.5 23 12.2 8 4.2 189

0%FBR 15 62.5 12 50.0 7 29.2 2 8.3 0 0.0 24

UnknownFBR 1 20.0 2 40.0 0 0.0 1 20.0 0 0.0 5

All respondents 183 57.7 145 45.7 111 35.0 39 12.3 10 3.2 317

N Row % N Row % N Row % N Row % N Row %

A competency and skills-based interview

approach

Same questions for each candidate

Different questions for each candidate

Other, please specify (e.g. formal

assessment, questionnaires, presentations)

No responseALL


Notes:TheparticularquestionaskedwasQ48:Wheninterviewingcandidatesfornon-executiveboarddirectorappointments,whichofthefollowingdoesyourcompanyuse?Pleaseselectallthatapply. ‘Other’includesreferencestobothformalandinformalassessments,questionnairesandpresentations,aswellaspsychometrictesting,backgroundandreferencechecks. ‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.


Notes:TheparticularquestionaskedwasQ56:Wheninterviewingcandidatesforexecutiveboardappointments,whichofthefollowingdoesyourcompanyuse? Pleaseselectallthatapply. ‘Other’includesreferencestobothformalandinformalassessments,questionnairesandpresentations,aswellaspsychometrictesting,backgroundandreferencechecks. ‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable. Multipleresponsequestion,sorowsmaysumtomorethan100%.

149

Table A7.2:FTSEcompaniesusingdifferentinterviewtypesintheirexecutivedirectorappointmentprocess,byFTSE100,FTSE250andfemaleboardrepresentation(FBR)

FTSE100 45 47.4 27 28.4 25 26.3 21 22.1 15 15.8 95

FTSE250 95 43.6 64 29.4 45 20.6 27 12.4 52 23.9 218

≥25%FBR 46 46.5 31 31.3 22 22.2 19 19.2 20 20.2 99

1-24%FBR 87 46.0 52 27.5 44 23.3 26 13.8 42 22.2 189

0%FBR 7 29.2 9 37.5 4 16.7 3 12.5 6 25.0 24

UnknownFBR 2 40.0 2 40.0 0 0.0 1 20.0 0 0.0 5

All respondents 142 44.8 94 29.7 70 22.1 49 15.5 68 21.5 317

N Row % N Row % N Row % N Row % N Row %


approach

Same questions for each candidate


approach

Other, please specify (e.g. formal

assessment, questionnaires, presentations)

No responseALL

150


Notes:TheparticularquestionaskedwasQ45:Pleaseindicatetheindividualsthatareinvolvedineachstageoftherecruitmentandappointmentprocessfornon-executiveboardpositions.Pleaseselectallthatapply.

‘Companychair’referstojustthatrole(amongothers),whereascompanychairornominationcommitteechair(wheredifferent)referstoeitherofthetworolesandincludescompaniesthatusedbothoreitherofthoserolesintheappointmentprocess.

Base:AllrespondentsprovidingdataforQ45=307.

Appointment stage N (% of companies reporting on a NED appointment)

Identifyingskillsrequirements, job/rolebriefandpersonspecifications 126 41.0Longlistingorshortlisting 43 14.0Interview 122 39.7Appointmentdecision 235 76.5Allstages 17 5.5Identifyingskillsrequirements, job/rolebriefandpersonspecifications 225 73.3Longlistingorshortlisting 238 77.5Interview 220 71.7Appointmentdecision 171 55.7Allstages 121 39.4Identifyingskillsrequirements, job/rolebriefandpersonspecifications 66 21.5Longlistingorshortlisting 242 78.8Interview 261 85.0Appointmentdecision 237 77.2Allstages 183 59.6Identifyingskillsrequirements, job/rolebriefandpersonspecifications 224 73.0Longlistingorshortlisting 213 69.4Interview 215 70.0Appointmentdecision 184 59.9Allstages 88 28.7Identifyingskillsrequirements, job/rolebriefandpersonspecifications 154 50.2Longlistingorshortlisting 241 78.5Interview 133 43.3Appointmentdecision 29 9.4Allstages 27 8.8Identifyingskillsrequirements, job/rolebriefandpersonspecifications 88 28.7Longlistingorshortlisting 91 29.6Interview 100 32.6Appointmentdecision 45 14.7Allstages 24 7.8

Full board of directors

Company chair

Company chair or nomination committee chair

Nomination committee members

Executive search firms

Other (included CEO, company secretary, head of talent management and HR)

Supporting tables for Chapter 8: Nomination committee Table A8.1:FTSEcompaniesusingindividualsateachstageofthenon-executivedirectorappointmentprocess

151

Table A8.2:FTSEcompaniesusingindividualsateachstageoftheexecutivedirector(ED)appointmentprocess


Notes:TheparticularquestionaskedwasQ53:ForexecutiveboardrolesotherthanCEO,pleaseindicatetheindividualsthatareinvolvedinthefollowingphasesoftherecruitmentandappointmentprocess.Pleaseselectallthatapply. ‘Companychair’referstojustthatrole(amongothers),whereascompanychairornominationcommitteechair(wheredifferent)referstoeitherofthetworolesandincludescompaniesthatusedbothoreitherofthoserolesintheappointmentprocess. ‘Other’includesnominationcommittee,companysecretary,andselectedNED(non-executivedirector)orED(executivedirector)boardmembers.

Notes:AllrespondentsprovidingdataexcludingthoseindicatingnoappointmentinOtherforQ53=197.

Appointment stage N (% of companies reporting on a NED appointment)

Identifyingskillsrequirements, job/rolebriefandpersonspecifications 100 50.8%Longlistingorshortlisting 36 18.3%Interview 76 38.6%Appointmentdecision 171 86.8%






Full board

Company chair

CEO

Executive search firm

HR director

Other (included nomination committee, company secretary, and selected NED or ED board members)

Table A8.3:Proportionofappointmentpanelmembersthatareeithermaleorfemaleateachappointmentstagefornon-executivedirectorappointments,byFTSE100andFTSE250

152

Nominationcommitteemembers 146 1.1 22.3 510 3.9 77.7 130 656Longlisting 94 1.0 21.2 350 3.7 78.8 95 444Shortlisting 117 1.1 22.8 396 3.8 77.2 105 513Finaldecision-makingpanel 242 2.0 20.5 940 7.6 79.5 123 1182All panels 599 1.3 21.4 2196 4.8 78.6 453 2795Nominationcommitteemembers 152 0.7 17.4 721 3.5 82.6 207 873Longlisting 82 0.5 14.8 471 3.1 85.2 153 553Shortlisting 118 0.7 15.6 637 3.5 84.4 180 755Finaldecision-makingpanel 200 1.0 15.2 1119 5.4 84.8 209 1319All panels 552 0.7 15.8 2948 3.9 84.2 749 3500Nominationcommitteemembers 301 0.9 19.6 1238 3.7 80.4 339 1539Longlisting 176 0.7 17.7 821 3.3 82.3 248 997Shortlisting 235 0.8 18.5 1033 3.6 81.5 285 1268Finaldecision-makingpanel 446 1.3 17.7 2069 6.2 82.3 336 2515All panels 1158 1.0 18.3 5161 4.3 81.7 1208 6319

FTSE 100

FTSE 250

All

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel

% of male panel members

Panels Panel member


Notes:TheparticularquestionaskedwasQ51:Fornon-executiveboarddirectorappointmentsmadebetweenyourcompany’s2012/13and2013/14annualreportingperiods,pleaseprovidethenumberoffemaleandmalemembersofthefollowingpanelsforeachappointmentmadeinthisperiod. ‘All’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.

Table continued on next page...

153

Table A8.4:Proportionofappointmentpanelmembersthatareeithermaleorfemaleateachappointmentstagefornon-executivedirectorappointments,byfemaleboardrepresentation(FBR)


≥25% FBR

1-24% FBR

0% FBR

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel


Panels Panel member

154

Nominationcommitteemembers 301 0.9 19.6 1238 3.7 80.4 339 1539Longlisting 176 0.7 17.7 821 3.3 82.3 248 997Shortlisting 235 0.8 18.5 1033 3.6 81.5 285 1268Finaldecision-makingpanel 446 1.3 17.7 2069 6.2 82.3 336 2515All panels 1158 1.0 18.3 5161 4.3 81.7 1208 6319

All

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel


Panels Panel member


Notes:TheparticularquestionaskedwasQ51:Fornon-executiveboarddirectorappointmentsmadebetweenyourcompany’s2012/13and2013/14annualreportingperiods,pleaseprovidethenumberoffemaleandmalemembersofthefollowingpanelsforeachappointmentmadeinthisperiod. ‘All’referstocompanieswith≥25%FBR,1-24%FBR,0%FBRandunknownFBRandthereforemaynotsumFBRcategoriesshownintable.

Table continued from previous page

155

Table A8.5:Proportionofappointmentpanelmembersthatareeithermaleorfemaleateachappointmentstageforexecutivedirectorappointments,byFTSE100andFTSE250


≥25% FBR

1-24% FBR

0% FBR

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel


Panels Panel member


Notes:TheparticularquestionaskedwasQ59:Forexecutiveboarddirectorappointmentsmadebetweenyourcompany’s2012/13and2013/14annualreportingperiods,pleaseprovidethenumberoffemaleandmalemembersofthefollowingpanelsforeachappointmentmadeinthatperiod. ‘All’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.

156

Table continued on next page...

Table A8.6:Proportionofappointmentpanelmembersthatareeithermaleorfemaleateachappointmentstageforexecutivedirectorappointments,byfemaleboardrepresentation(FBR)


≥25% FBR

1-24% FBR

0% FBR

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel


Panels Panel Member

157

Nominationcommitteemembers 114 1.2 23.8 365 3.8 76.2 97 479Longlisting 69 1.1 23.6 223 3.5 76.4 64 292Shortlisting 78 1.1 23.7 251 3.6 76.3 70 329Finaldecision-makingpanel 171 1.8 23.1 569 5.9 76.9 96 740All panels 432 1.3 23.5 1408 4.3 76.5 327 1840

All

WomenAverage women

per panel

% of female panel

members

MenAverage men per

panel


Panels Panel member


Notes:TheparticularquestionaskedwasQ59:Forexecutiveboarddirectorappointmentsmadebetweenyourcompany’s2012/13and2013/14annualreportingperiods,pleaseprovidethenumberoffemaleandmalemembersofthefollowingpanelsforeachappointmentmadeinthatperiod. ‘All’referstocompanieswith≥25%FBR,1-24%FBR,0%FBRandunknownFBRandthereforemaynotsumFBRcategoriesshownintable.

Table continued from previous page

158

N N NRow % Row % Row % TOTAL

N 24 34 26 29 2 59

Col.% 25.5 15.9 26.8 15.6 8.3 18.9

N 49 75 47 72 3 124

Col.% 52.1 35.0 48.5 38.7 12.5 39.7

N 19 21 12 25 3 40

Col.% 20.2 9.8 12.4 13.4 12.5 12.8

N 65 96 58 95 5 162

Col.% 69.1 44.9 59.8 51.1 20.8 51.9

N 17 23 8 73 5 41

Col.% 18.1 10.7 8.2 39.2 20.8 13.1

N 43 93 42 80 11 137

Col.% 45.7 43.5 43.3 43.0 45.8 43.9

N 45 97 43 85 11 143

Col.% 47.9 45.3 44.3 45.7 45.8 45.8

N 9 20 9 18 2 29

Col.% 9.6 9.3 9.3 9.7 8.3 9.3

94 214 97 186 24 312

Aspecialistmemberofthehumanresourcesteamattendsandadvisesateachstage(1)

TrainingofthoseinvolvedintheappointmentprocessoneitherdiscriminatorypracticesORunconsciousbias(5-6)

EveryoneinvolvedintheappointmentprocessisprovidedwithtrainingandguidanceabouttheUKCorporateGovernanceCoderequirements(7)

AspecialistboardgovernanceroleadvisesonappropriateapplicationofeitherEA10ORUKCorporateGovernanceCode2012&2014(2-3)

Training provided (Any of 5-7)

All respondents to Q31

No training provided (8)

Corporatelawyersadviseateachstageofdecisionmaking(4)

Specialist advisor (Any of 1-4)

Table A8.7:UseofspecialistadvisorsortrainingtoensurepeopleinvolvedineachstageoftheboardappointmentprocessareawareoftheEqualityAct2010andtheFinancialReportingCouncil(FRC)UKCorporateGovernanceCode,byproportionofwomenonboards


Notes:TheparticularquestionaskedwasQ31:HowdoesyourcompanyensurethatpeopleinvolvedineachstageoftheboardappointmentprocessareawareoftherequirementsoftheEqualityAct2010(EA2010)andtheFRCUKCorporateGovernanceCode(2012&2014)requirementsforboardappointments?Pleaseselectallthatapply. Specialistadvisorisanyresponsetoeither:(1)Aspecialistmemberofthehumanresourcesteamattendsandadvisesateachstage;(2)AspecialistboardgovernanceroleadvisesonappropriateapplicationoftheEqualityAct2010;(3)AspecialistboardgovernanceroleadvisesonappropriateapplicationoftheFRCUKCorporateGovernanceCode2012&2014requirements;or(4)Corporatelawyersadviseateachstageofdecisionmaking. Usetrainingisanyresponsetoeither:(5)Everyoneinvolvedintheappointmentprocessisprovidedwithtrainingandguidanceintheavoidanceofdiscriminatorypractices;(6)Everyoneinvolvedintheappointmentprocessisprovidedwithtrainingandguidanceintheavoidanceofunconsciousbias;or(7)EveryoneinvolvedintheappointmentprocessisprovidedwithtrainingandguidanceabouttheFRCUKCorporateGovernanceCoderequirements. ‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.

159

Source:Executivesearchfirmsurvey(2013/14).

Notes:TheparticularquestionaskedwasQ.23:Inyourexperience,towhatextentareyourorganisation’sFTSE350clientsawareofthefollowing?(Alloptionspresentinthetable).

Table A8.8:ExecutivesearchfirmimpressionsoftheirFTSE350clients’awarenessofmeasuresandmeansofgeneratinggreaterdiversityintheboardroom

Measures they can take to ensure selection is non-discriminatory

including assessment of skills and

competences of candidates

Measures they can take to improve the

representation of women in the candidate pool

The Financial Reporting

Council’s UK Corporate

Governance Code requirements on

diversity

N N N NColumn %

Column %

Column %

Column %

The way the Equality Act 2010 applies to the board appointment

process

Notatall 1 3.8 0 0.0 0 0.0 0 0.0

Verylittle 0 0.0 2 3.8 2 7.7 4 15.4

Somewhat 13 50.0 10 38.5 8 30.8 15 57.7

Toagreatextent 12 33.3 14 53.8 16 61.5 7 26.9

Total 26 26 26 26

160


Notes:TheparticularquestionaskedwasQ60:Whenrecruiting,doesyoucompanycarryoutanyspecificactivitiestoencourageapplicationsfromwomenforseniorandboardappointments? ‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable. FBR=femaleboardrepresentationin2013/14.

Additional charts and supporting tables for Chapter 9: Improving diversity in the talent pipeline and the candidate pool Table A9.1:Activitiestoencourageapplicationsfromwomenforseniorandboardappointments,byFTSE100andFTSE250

Yes - carries out activities to encourage

applications from women

N NRow % Row %

No - does not carry out activities to encourage

applications from women All respondents

FTSE100 52 54.7 43 45.3 95

FTSE250 77 35.3 141 64.7 218

≥25%FBR 40 40.4 59 59.6 99

1-24%FBR 79 41.8 110 58.2 189

0%FBR 10 41.7 14 58.3 24

Unknown 2 40.0 3 60.0 5

All 131 41.3 186 58.7 317

161

Table A9.2:Activitiestoencourageapplicationsfromwomenfornon-executiveboarddirectorroles,byFTSE100andFTSE250


Notes:TheparticularquestionaskedwasQ61:Whatspecificactivitiesdoesyourcompanyundertaketoencourageapplicationsfromwomenfornon-executiveboarddirectorroles?

Notes:131FTSEcompanies(noblankorN/AatQ61).

FTSE 100 FTSE 250

N N NColumn %

(undertaking

activities

Column % (undertaking

activities


activities

All respondents

28 53.8 41 53.2 69 52.7

38 73.1 62 61.4 101 77.1

4 7.7 12 15.6 16 12.2

6 11.5 5 6.5 12 9.2

7 13.5 1 1.3 8 6.1

0 0 2 2.6 2 1.5

52 77 131

3 5.8 1 1.3 4 3.1

11 21.2 12 15.5 23 17.6

Explicitly target female candidates(includingproactivesearchesandshort/longlistsincludingwomen)

Use executive search firms: Eitherdirectlyinstructingthemtoattractwomen/diversecandidatesorrelyingonthemtoprovideavarietyofcandidatesunprompted

Internal – process(includingpolicy/guidelines/targets/search/training/benchmarkingagainstothercompanies)

Use networks(Ownpersonalnetworks/contactstotargetcandidatesorwiderprofessionalorgender-specificnetworks)

Internal – people(candidatedevelopmentprogrammes/successionplanning)

No appointment (no opportunity) or not applicable

Total number of FTSE companies undertaking activities to encourage applications from women

Other mentioned (including: Reputation – suggest current performance an incentive; and Discussion with candidates)

Explicitly target general diversity (not gender-specific)

162

Table A9.3:Activitiestoencourageapplicationsfromwomenforexecutiveboarddirectorroles,byFTSE100andFTSE250


Notes:TheparticularquestionaskedwasQ62:Whatspecificactivitiesdoesyourcompanyundertaketoencourageapplicationsfromwomenforexecutiveboarddirectorroles?

Base:103FTSEcompanies;28companiesindicatedN/AorleftblankatQ62(8FTSE100,19FTSE250).

FTSE 100 FTSE 250

N N NColumn %

(undertaking

activities


activities


activities

All respondents

16 36.4 24 41.4 41 39.8

25 56.8 36 62.1 61 59.2

15 34.1 8 13.8 23 22.3

10 22.7 5 8.6 15 14.6

3 6.8 1 1.7 5 4.9

4 9.1 11 19.0 15 14.6

44 58 103

3 6.8 2 3.4 5 4.9

8 18.2 9 15.5 17 16.5

Explicitly target female candidates(includingproactivesearchesandshort/longlistsincludingwomen)

Use ESFs:Eitherdirectlyinstructingthemorrelyingonthemtoprovideavarietyofcandidates

Internal – people(candidatedevelopmentprogrammes/successionplanning)

Internal – process(includingpolicy/guidelines/targets/search/training/benchmarkingagainstothercompanies)

Use networks(Ownpersonalnetworks/contactstotargetcandidatesorwiderprofessionalorgender-specificnetworks)

No appointment(noopportunity)

Total number of FTSE companies undertaking activities to encourage applications from women

Reputation–suggestcurrentperformanceanincentive

Explicitly target general diversity (not gender-specific)

163

Figure A9.1:CompaniesmakingboardappointmentsfromoutsidetheFTSE350,byFTSE100andFTSE250


Notes:Theparticularquestionaskedwas.Q65.Haveanyoftheboardappointmentsmadebetweenthe2012/13and2013/14annualreportscomefromthenot-for-profitsector,academia,thepublicsector,theprofessionsorcompaniesoutsidetheFTSE350? AppointmentsmadeoutsidetheFTSE350fromthenot-for-profitsector,academia,thepublicsector,theprofessionsorcompaniesoutsidetheFTSE350. Noappointmentsmade–calculatedbyresponsestoQ44andQ45,andchangestoboardnumberatQ4.

Notes:Allrespondents=317,FTSE100=95,FTSE250=218.

All respondents 111 81125 39.4%

Yes - appointed from outside the FTSE 350

No - made an appointment but did not appoint from outside the FTSE 350

Noappointmentmade

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of all FTSE companies

FTSE 100

FTSE 250

30 42.1% 46 9

65 7083 38.1%

164

Table A9.4:Executiveandnon-executivedirectorappointmentsfromoutsidetheFTSE350,byfemaleandmale,FTSE100andFTSE250,andfemaleboardrepresentation(FBR)


Notes:TheparticularquestionaskedwasQ66:Ifyourappointmentsincludepeoplefromthenot-for-profitsector,thepublicsector,academia,theprofessionsorcompaniesfromoutsidetheFTSE350,pleaseprovidethenumberofsuccessfulappointeesfromeachsectorduringyourcompany’s2012/13to2013/14annualreportingperiod.

*AllappointmentsrowiscalculatedfromresponsestoQ44:Ifyourcompanyhasmadeanon-executiveappointmenttotheboardbetweenits2012/13and2013/14annualreportingperiod,pleasestatethenumberofcandidatesthatparticipatedinthefollowingrecruitmentandappointmentstages.Pleaseprovidenumbersforeachnon-executiveboardappointmentmadewithinthisperiod,andQ52:Ifyourcompanyhasmadeanexecutiveappointmenttotheboardbetweenits2012/13and2013/14annualreportingperiod,pleasestatethenumberofcandidatesthatparticipatedinthefollowingrecruitmentandappointmentstages.Pleaseprovidenumbersforeachexecutiveboardappointmentmadewithinthisperiod.


Female executive director

appointments (outside FTSE

350)

Female non-executive director

appointments (outside FTSE

350)

All female appointments (outside FTSE

350)

All appointments (outside FTSE 350)

N N N ED NED Total

Row % (of ED

appointments)

Row % (of NED appointments)

Row % (of all

appointments)

FTSE100 4 30.8 31 52.5 35 48.6 13 59 72

FTSE250 8 30.8 60 56.6 68 51.5 26 106 132

≥25%FBR 5 38.5 43 64.2 48 60.0 13 67 80

1-24%FBR 8 32.0 49 51.0 57 47.1 25 96 121

0%FBR 0 0.0 0 0.0 0 0.0 2 5 7

Unknown FBR 0 0.0 0 0.0 0 0.0 0 0 0

All appointments outside 13 32.5 92 54.8 105 50.5 40 168 208 FTSE 350

All appointments* 15 15.5 165 53.2 180 44.2 97 310 407

165

Table A9.5:WhereappointmentsfromoutsidetheFTSE350havecomefrom,byexecutiveandnon-executiverolesandbyfemaleandmaleappointments


Notes:TheparticularquestionaskedwasQ66:Ifyourappointmentsincludepeoplefromthenot-for-profitsector,thepublicsector,academia,theprofessionsorcompaniesfromoutsidetheFTSE350,pleaseprovidethenumberofsuccessfulappointeesfromeachsectorduringyourcompany’s2012/13to2013/14annualreportingperiod.

Executive director


N N NColumn % Column % Column %

All respondents

Not-for-profitsector 5 12.5 9 5.4 14 6.7

Publicsector 2 5.0 17 10.1 19 9.1

Academia 2 5.0 11 6.5 13 6.3

Theprofessions 8 20.0 43 25.6 51 24.5

CompaniesoutsidetheFTSE350 23 57.5 88 52.4 111 53.4

Total 40 168 208

%ofallappointments 19.2 80.7

Femaleappointments

Not-for-profitsector 4 30.8% 5 5.4% 9 8.6%

Publicsector 1 7.7% 13 14.1% 14 13.3%

Academia 1 7.7% 5 5.4% 6 5.7%

Theprofessions 2 15.4% 20 21.7% 22 21.0%

CompaniesoutsidetheFTSE350 5 38.5% 49 53.3% 54 51.4%

Total 13 92 105

%offemaleappointments 12.4% 87.6%

Maleappointments

Not-for-profitsector 1 3.7% 4 5.3% 5 4.9%

Publicsector 1 3.7% 4 5.3% 5 4.9%

Academia 1 3.7% 6 7.9% 7 6.8%

Theprofessions 6 22.2% 23 30.3% 29 28.2%

CompaniesoutsidetheFTSE350 18 66.7% 39 51.3% 57 55.3%

Total 27 76 103

%ofmaleappointments 26.2% 73.8%

166

Table A9.6:Activitiesundertakentoattractanddevelopfemaletalent,byFTSE100andFTSE250,femaleboardrepresentation(FBR)

FTSE100 30 35.7 71 84.5 68 81.0 16 19.0 17 20.2 72 85.7 64 76.2 49 58.3 84FTSE250 27 18.5 85 58.2 72 49.3 20 13.7 10 6.8 109 74.7 108 74.0 58 39.7 146≥25%FBR 20 27.8 52 72.2 48 66.7 13 18.1 10 13.9 57 79.2 57 79.2 38 52.8 721-24%FBR 35 24.5 98 68.5 88 61.5 20 14.0 16 11.2 112 78.3 106 74.1 61 42.7 1430%FBR 0 0.0 5 38.5 3 23.1 2 15.4 1 7.7 11 84.6 7 53.8 4 30.8 13UnknownFBR 2 50.0 3 75.0 2 50.0 1 25.0 0 0.0 3 75.0 4 100.0 4 100.0 4All respondents 57 24.6 158 68.1 141 60.8 36 15.5 27 11.6 183 78.9 174 75.0 107 46.1 232

Reserve training places

for women

Networking opportunities

Mentoring/ sponsor

programmes for women

Opportunities to shadow

board members

Target advertising

towards women

Internal promotion

Offer flexible and part-time

working

Offer flexible career paths

Count (N=)

N N N N N N N NRow % Row % Row % Row % Row % Row % Row % Row %


Notes:TheparticularquestionaskedwasQ63:Toimprovetherepresentationofwomenatseniormanagementandboardlevels,doesyourcompanycarryoutanyofthefollowingactivitiestoattractanddevelopfemaletalentwithinthecompany?Pleaseselectallthatapply. ‘Allrespondents’referstoFTSE100/250/SmallCapanddelistedcompanieswhorespondedtosurveyandthereforemaynotsumFTSE100andFTSE250intable.

167

ContactsThispublicationandrelatedequalityandhumanrightsresourcesareavailablefromtheCommission’swebsite: www.equalityhumanrights.com

Foradvice,informationorguidanceonequality,discriminationorhumanrightsissues,pleasecontacttheEquality Advisory and Support Service, afreeandindependentservice.

Website www.equalityadvisoryservice.com

Telephone 0808 800 0082

Textphone 0808 800 0084

Hours 09:00 to 20:00 (Monday to Friday) 10:00 to 14:00 (Saturday)

Post FREEPOST Equality Advisory Support Service FPN4431

Questionsandcommentsregardingthispublicationmaybe addressedto:[email protected]. TheCommissionwelcomesyourfeedback.

Alternative formatsThisguideisavailableasaPDFfileandasaMicrosoftWordfile fromwww.equalityhumanrights.com.ForinformationonaccessingaCommissionpublicationinanalternativeformat,pleasecontact:[email protected]

©2016EqualityandHumanRightsCommission PublishedMarch2016

ISBN:978-1-84206-673-7

Equality and Human Rights Commission · Commissioner at the Equality and Human Rights Commission 6....

Documents

Transcript of Equality and Human Rights Commission · Commissioner at the Equality and Human Rights Commission 6....