Boards still facing diversity challenges

A lack of genuine diversity at the top of British business suggests that there will be little change in the C-Suite in coming years, according to new research.

The report by ICSA: The Governance Institute, London Business School’s Leadership Institute and Elisabeth Marx Associates compared FTSE 100 boards in 2017 and in 1996 and found that, while there had been progress in gender diversity at non-executive director level, boards remained more obviously male, as well as significantly whiter than the British population. It also found that directors are increasing in age, with little diversity in terms of educational or career background.

According to Professor Randall S Peterson, Academic Director of the London Business School Leadership Institute added that the next generation of directors are equally as elite-educated and male as current executives.

He said: “In many of the headline-grabbing areas that the initial 1996 research uncovered there has been genuine and sometimes radical change, such as the increase of female directors from 4% to 28% and international experience in the boardroom climbing from 24% to 57%. In other areas, however, little has changed: a quarter of all directors are educated at Oxbridge or Harvard and the percentage of female executive directors has climbed from 1% to just 3%. Alarmingly, in some ways the boardroom is becoming significantly less diverse, such as the increase in the percentage of directors with a background in finance and a growing lack of international experience, which could potentially narrow the focus in British boardrooms.”

The main findings are:

• • The average board size has reduced to 11 directors from 12, of which 26% are executives and 74% are non-executives, compared to 49% executive and 51% non-executives in 1996
  • 28% of board directors are women compared to 4.1% in 1996
  • The average age of a FTSE 100 board director is 58.5 years compared to 56 in 1996; non-executive directors are on average 60 years old and executives 53 years of age (unchanged from 1996)
  • Directors with an accountancy or finance background predominate (49%, up from 38%)
  • 57% of directors have international experience, more than twice the percentage in 1996 (24%)
  • The majority of board directors are university-educated and a considerable number hold degrees from top international universities and business schools.
  • The most admired companies in 1996 as well as in the present tend to have more females, more executive directors and the boards are less heavy on finance backgrounds.

“The prevalence of directors with an accountancy/finance background carries a risk that Nomination Committees might be recruiting in their own image and are not sufficiently diverse to look at the broadest range of non-executive candidates. We need a much broader definition of diversity, reflecting the complexity of business and addressing a wider set of diversity criteria all at the same time, rather than a ‘piecemeal’ approach”, commented Dr Elisabeth Marx of Elisabeth Marx Associates.

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