UK boards of directors - evolution continues
We are delighted to present our latest research analysing all new board appointments made in Europe and the US during 2020. For the full reports, see our ‘Board Monitor Europe 2021’ and ‘Board Monitor US 2021.’
Here are some reflections on the UK data, which covers the 362 appointments made to the boards of FTSE 350 companies in the course of last year.
It is heartening to see that, for the second year in a row, women made up half of all appointments. While we know from Hampton-Alexander that while the total population of FTSE 350 directors is now more than 33% female, more than four in ten of companies in the index have boards that do not meet that ratio.
Our data suggests that these boards are determined to address that shortfall. And, a full decade after the original Davies Review, the pressure for improvement remains high. Good to know.
In contrast to the US, the number of Black and Asian directors appointed in the course of 2020 did not spike sharply upwards. In the US, the number of Black directors appointed during 2020 jumped to 28% of the total, nearly three times the proportion compared to the prior year. It is also notable that three-quarters of those appointments happened after the murder of George Floyd in May 2020.
But let’s not jump to the conclusion that UK boards are being slow to diversify themselves on racial or ethnic grounds. Remember that Sir John Parker’s review set 2021 as the deadline for FTSE 100 companies to appoint at least one director of colour, and 2024 for the FTSE 250. So this journey is still in progress. I anticipate the numbers on racial inclusion to tick up substantially in the coming years.
Beyond these headlines, the striking numbers to emerge from this report are that 48% of all board appointments went to current or former chief executives and finance directors. While that is not a surprising statistic for executive appointments, it suggests that a substantial proportion of non-executives are still drawn from the ranks of those who have held either of those top two executive roles.
Add to that, a full two-thirds of those appointed have previous experience serving on a public board. In short, prior experience at the top table matters, and probably remains the strongest single credential for being appointed to subsequent board roles.
As I said to the Financial Times, I think Chairs and boards are under pressure to ensure that their board includes sufficient breadth and depth of experience to deal with the increasingly long list of critical topics they face within an environment of ever increasing shareholder, regulatory, media and societal scrutiny. At the same time, they are equally (and quite rightly) under pressure to diversify the pool of board directors which, by definition, means appointing talented individuals with less or no boardroom experience.
Chairs seek the presence of individuals with proven experience on their boards, and also high potential individuals who bring different skills and fresh perspectives. Bringing those twin threads together within an effective board is the challenge facing today’s Chairs. And, by the way, helping Chairs to achieve exactly that is a fabulous challenge for headhunters!