FTSE boards lack ‘diversity of expertise’, study finds

London, Thursday 15 June 2023: The number of women on FTSE All-Share boards has continued to rise this year (40%), but a new report released today highlights deep concerns about the lack of skills and diversity of expertise among FTSE All-Share executive board members – both male and female. New data reveals that just 2.3% of executive board members (men and women) hold positions other than CEO, CFO or Company Secretary and only 10% of executive board directors are women.

This data has been published in a new report by Women on Boards UK in partnership with global consulting firm, Protiviti. The Hidden Talent: Diversity & Inclusion in the FTSE All-Share report monitors the gender representation on FTSE All-Share and AIM listed boards. Plus, in a first of its kind analysis of over 1,000 listed companies, the report also looks at the mix of skills and expertise of executives called on to join the board, shining light on a crucial but often forgotten area of boardroom diversity – diversity of expertise.

Only eighty-one (2.3%) executive members across almost 4,800 executive board seats hold positions outside of CEO, CFO or Company Secretary. Furthermore, within this small group of individuals, the report found a further concentration of expertise. The majority of these executives held positions focused on operational efficiency, with 68% either being Chief Operating Officer or Chief Technology Officer. The remainder of roles (less than 30 across almost 600 firms) include Employee Representative; General Counsel (senior legal adviser); Chief Information Officer; Chief Strategy Officer; Chief People Officer.

Fiona Hathorn, CEO and co-founder of Women on Boards says, “The responsibilities of the board have continued to evolve over the past decade and yet the focus remains on traditional skill sets such as finance, operations and CEO experience. Skills such as social responsibility, human resources or marketing, show negligible presence in the boardroom. Traditional skills and leadership experience are of course desirable but companies must take a more holistic view and ensure an optimal mix of expertise to navigate the changing business landscape. It’s time to redefine “board-ready talent” and by doing so we believe we will also see improvements on diversity targets for gender and ethnicity representation in the boardroom.”

Are UK boardrooms paying lip service to people and culture?

In the midst of a “war for talent” and “the great resignation” most organisations argue that their workforce is their most valuable asset, yet very few boards have an experienced and strong ‘talent and leadership’ executive voice in the boardroom. According to the Hidden Talent report there are just two executive board members across the FTSE All-Share who have a human resources or people and culture job title. While this skillset may be filled by non-executive directors the fact that this is one of the least prevalent executive skills at board-level is concerning in light of the fact that when surveyed a strong majority of board members (82%) stated that people and culture was a ‘top level’ area for their boards and a ‘significant’ issue.

They also agreed (82%) that ‘employees expect leadership from boards on people and culture’. Despite this, only 27% of board members surveyed said they draw on specialist HR expertise and 40% state that the quality of people and culture discussions were ‘weaker’ or ‘much weaker’ than other topics.

Janet Barberis, Managing Director at Protiviti adds, “Boards today now know how important it is to consider their people and to consciously create a culture that engages them. Driving cultural change within an organisation is complex and requires significant professional skills and experience to achieve. To do so, companies need to look beyond the typical pool of CEOs or CFOs, opening their boardrooms to people with different areas of expertise, including human resources and people and culture.”

Improvement on gender diversity but still a long way to go

Gender diversity programmes helped along by three consecutive government-backed schemes have pushed the proportion of women holding boardroom roles across FTSE 350 companies from 9.5% in 2011 to 40.2% in 2023. Women on Boards has been measuring gender diversity in the FTSE All-Share firms below the top 350 listed companies and has seen numbers improve from 48% of firms not achieving a target of 33% women on boards in 2021 to 16% in 2023.

However, the FTSE Women Leaders Review has set a goal for 40% female representation, supporting Women on Boards long-held campaign aim of 40:40:20 being truly representative. In addition they, and the Financial Conduct Authority, have outlined that one of the four most influential roles should be held by a woman - these roles are CEO, CFO, SID or Chair. 19% FTSE 100 do not meet these targets, rising to 36% FTSE 250, 41% FTSE All-Share ex350 and 73% among Alternative Investment Market (AIM) listed companies are yet to reach this goal.

Fiona Hathorn adds, “Since we started these reports three years ago, we’re pleased with the progress made on women non-executive directors outside of the FTSE 350 but just having women in NED roles is not sufficient to have an impact on the executive pipeline. This report is an opportunity for our largest listed companies, FTSE All-Share and AIM to take action and make meaningful changes that will help to transform their business for the better.”

To access the full report, click here.