The issue of gender diversity on British boards has never gone away, so we're returning to this topic as part of our global International Women's Day coverage.
Specifically, we’re focusing on the FTSE 100, and how many women are in the most prestigious and arguably demanding position of chief executive.
The FTSE 100 is an easy data set to examine and a useful one, because it’s a recognised as a bellwether for UK PLC – the index is quoted daily on TV and radio shows. To be a FTSE 100 chief executive carries a certain cachet, profile and earnings clout. Astonishingly, having a female CEO is still seen as a novelty worth commenting on.
There are currently seven female chief executives in the FTSE 100: Alison Brittain (Whitbread), Alison Rose (NatWest), Amanda Blanc (Aviva), Emma Walmsley (GSK), Jette Nygaard-Andersen (Entain), Liv Garfield (Severn Trent) and Milena Mondini de Focatiis (Admiral).
Separately, there are three female chairs in the index's investment trusts: F&C’s Beatrice Holland, Scottish Mortgage’s Fiona McBain and Pershing Square’s Anne Farlow.
At best, then, you could say women represent 10% of the top leadership roles in the FTSE 100. If you're being very specific and only talking about chief executives, though, it's 7%. There are six Andrews or Andys, six Simons, four Davids, and five Stephens or Steves. There are almost as many Andrews and Simons as female chief executives.
Not so long ago there were no female chief executives, so this ostensibly counts as progress. But you could be forgiven for asking how long it will take to reach 20%, 30% or even 50% or more. The UK is a leader in some areas such a corporate governance, but this 7% figure is roughly average in the global context: according to Equileap data for 2023, some 6% of global companies have a female CEO, 15% a female CFO, and 8% a female chair of the board. That compares with 5% of companies globally with a female CEO, 13% with a female CFO and 7% have a female chair the previous year, according to Equileap data.
My colleague Ruth Saldanha has looked at the issue of the gender pay gap in relation to the S&P 500. In some European countries, there are mandatory quotas for female representation on boards, but the UK has a target-based system, although not one for women CEOs.
How did the UK get to this point? I explain more of the back story in this article, entitled UK Boardroom Targets Explained. In summary, however: the independent Hampton-Alexander Review ("FTSE Women Leaders") was set up in February 2016 to improve the representation of women in FTSE 350 boardrooms above 33% by 2020. FTSE 100 and 250 companies beat this goal, but for the 350, the result was 29%.
The Review has now been discontinued, with the idea that its aims had been roughly achieved. (The 30% Club was set up before this in 2010 with the aim of reaching a minimum of 30% women on the board – it’s definitely not taken a "mission accomplished" approach to the issue, and continues to advocate for greater gender representation to this day.)
Here it’s important to separate the intuitive sense that "things are improving, albeit slowly" with the statistical reality; reaching 30% on a board of roughly 10 is an impressive increase from 0% or even 10% but it’s still needs to increase by 50% to reach half. The change in the headline figure was driven by more women taking up non-executive director roles, which don’t carry the clout of CEO/chairman/CFO.
Hampton-Alexander reports from 2016 to 2020 are still online, and are worth reading for the context. They show the initial struggles the review had in getting some companies to disclose gender data and to take the initiative seriously. But the reports also show how much progress can be made in a short space of time if there’s enough political heft behind it. Between 2017 and 2020, the percentage of women serving on FTSE 100 boards increased from 27.7% to 36.2%. The initiative also shows the benefit of having a top-down approach forcing companies to address these issues. So how did that happen?
Reviewing The Review
An annual review concentrated the minds of boards, which knew they had to show an improvement from the previous year. A similar body for ethnic minority representation in UK plc, the Parker Review, has run in parallel with Hampton-Alexander, and is still reporting – its 2023 report is due this month. It’s easy to conflate the two issues – gender and ethnic diversity – and the finance industry likes to categorise "issues" neatly so they can be presented to the wider world, especially investors. But "we’re making great progress on diversity" becomes a mantra that loses meaning unless we look at the data and the wider social context.
Not all industries represented by the very internationally focused FTSE 100 moved at comparable speed in the period – financial services moved faster than mining companies, for example. It’s hard to generalise though: NatWest and Aviva now have two women in the top job, but that doesn’t mean the wider finance industry, which is traditionally male-dominated, is now a utopia for women. Quite the contrary.
In recent years, Morningstar has reported on gender diversity in the UK fund management industry. Our 2019 exclusive More Funds Run By Daves Than Women stoked controversy and some soul searching. We followed this up in 2021, and in 2022 (after updating our methodology) we found women fund managers now outnumber Daves, a trend that has continued. But that doesn’t leave much room for complacency.
Fund management is a niche within the City of London/Scotland and that itself is part of the wider financial services industry, which is keen to promote diversity through recruitment and education. Every week we ask fund managers how the industry can boost its diversity, and while the answers vary, the consistent theme seems to be one of reaching girls and young women at school and university level.
Given changes in society and female workforce participation, it seems disappointing to have a figure as low as 7-10% for the FTSE 100, then. Out of the scope of this article are discussions on how you get to become a CEO in the first place, what personal sacrifices you need to make, and why the odds are even less favourable if you come from a poorer background. Most people would like the pay package – currently running over £3 million in the FTSE 100 – but the hours and stress would put be offputting to all but the most determined (and lucky).
UK companies cannot legally discriminate against female candidates, but the obstacles to securing the top job are legion, such as the practical costs of childcare and maternity or paternity leave, alongside more psychological factors like unconscious bias. To take it back further in the story, the soaring cost of education and housing will hold many young women back from getting to the boardroom in the first place. Privilege is harder to measure in data sets but it has a deciding role in whether you get to the top.
It Matters
But having women CEOs still matters. In 2023, companies can see the benefits of having a public-facing female leader. Given the importance of banking and pharmaceuticals to the UK economy, having Alison Rose and Emma Walmsley in the top jobs has a totemic value too – because they’re effectively speaking for their industries, and often to overseas investors.
This isn’t just "optics", then. Companies want their boards to look more like society at large than a select group of men named Simon, David, or Andrew. But the knock-on effects are practical. It helps with recruitment, attracting and retaining customers. There’s growing academic evidence to link board diversity with outsised shareholder returns. But it’s probably too early to analyse this for our FTSE 100 companies. The more progress we get, the more evidence we get to analyse.
Can we say conclusively that having a female boss can make a company a winner? As ESG just becomes normal business practice, so too will having female leadership. Until then, we will continue to track the milestones on a very long journey. See you next year, when hopefully it will be even better news than last.
