Skip to content

26 September, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • board control

      Are boards losing control?

      We need to ensure that regulations do not inappropriately reduce a board’s ability to take...

    • audit reform Labour commits to audit reform legislation

      Shadow minister for business, Jonathan Reynolds, says Labour will push through audit reform when in...

    • News round-up: this week in governance

      Lonely leadership; how governance helps in a crisis; Kerrie Waring to depart ICGN; ESG and...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • sustainability into finance

      How to integrate sustainability into financial decision-making

      Proactive leadership and board commitment are essential to transform notions of sustainability into fiscally viable...

    • reporting requirements

      Don’t let reporting requirements lead to boilerplate disclosures

      We must balance the need for disclosure of non-financial information so that it is sufficient,...

    • policy on human rights

      Why you need a policy on human rights

      As well as being the right thing to do, this element of a sustainable business...

  • Comment
      • View all
    • board control

      Are boards losing control?

      We need to ensure that regulations do not inappropriately reduce a board’s ability to take...

    • reporting requirements Don’t let reporting requirements lead to boilerplate disclosures

      We must balance the need for disclosure of non-financial information so that it is sufficient,...

    • CEO talent Can high CEO turnover boost gender equality?

      The trend for boards favouring internal pipelines for CEO succession creates an opportunity to nurture...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • helle bank jorgensen Helle Bank Jørgensen on governance, ESG and how board directors can become stewards of the future

      In spite of ESG toxicity in the US, she remains optimistic that companies are working...

    • information resilience IT transformation sees boards moving to ‘continuous’ management

      Data analytics available on demand requires a resilient—and selective—approach to sharing information, a webinar panel...

    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • CEO talent Can high CEO turnover boost gender equality?

      The trend for boards favouring internal pipelines for CEO succession creates an opportunity to nurture...

    • Starbucks sign outside shop in Warsaw, Poland DEI policies are targets for litigation, warns US lawyer

      Right-wing activists will continue to sue corporates over diversity, equity and inclusion policies they perceive...

    • CEO churn CEO churn is highest since 2019

      Chief executive appointments in the FTSE 100 are also up—but only 27% of incoming CEOs...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • ciia risk in focus

      Risk in Focus 2024: Hot topics for internal auditors

      Risk in Focus 2024 surveyed chief audit executives on their key challenges: geopolitical uncertainty and cybersecurity...

    • G20/OECD Principles of Corporate Governance 2023 cover

      G20/OECD Principles of Corporate Governance 2023

      The G20/OECD principles help policy makers improve the regulatory and institutional framework for corporate governance.

    • stakeholder engagement

      Director Reference Guide: Stakeholder engagement

      Board Agenda's 'Director Reference Guide' for boards on building an honest and trust-based relationship with...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

FRC report calls for more diversity on nominations committees

by Gavin Hinks on July 22, 2021

Nominations committees must be more diverse themselves if they are to boost diversity in their organisations, says a report for the Financial Reporting Council.

Business meeting

Image: Rawpixel.com/Shutterstock.com

Nominations committees must become more diverse themselves if they are to increase diversity in boardrooms, according to a new report.

The conclusion comes as part of research that looks into diversity in FTSE 350 companies and also finds that higher levels of gender diversity in the boardroom “positively correlate” to better financial performance, with the boost coming after three to five years.

However, the research could draw few conclusions about ethnic diversity on boards due to low levels of representation making impact difficult to measure.

Conducted by the London Business School Leadership Institute and research consultancy SQW on behalf of the Financial Reporting Council (FRC) the research looked at the FTSE 350 between 2001 and 2019 using data on EBITDA margins, stock returns and shareholder dissent.

The report’s conclusions spell out the benefits of gender diversity and detail actions that should be taken for companies to continue making improvements. According to Sir Jon Thompson, the FRC’s chief executive, the UK’s governance code says that a board appointments process should promote diversity.

“The FRC wants to see companies which thrive in the long term and both benefit the economy, society and reflect its make-up. I want to see board invest time and energy in making diverse appointments not to achieve a target but because it will have a positive impact on their business,” he says.

Diversity on nominations committees

Nominations committees come in for special attention in the report, as might be expected. The report details best practice actions already used, but also identifies action that are only “moderately well utilised”.

These include ensuring committees are themselves diverse; providing clear mandates to search firms to look for diversity; and beginning searches early to “build longer-term relationships with potential appointments”.

But when researchers surveyed directors they uncovered a raft of other measures that are already in widespread use including a skills assessment for boards, managing talent pipelines with an eye on diversity and setting clear targets focused on diversity categories.

There were other findings about the effects of diversity. Boardroom culture tends to become more relationship-focused and collaborative; stock performance appears to improve; and boards are less likely to provoke shareholder dissent.

The report also provided anecdotes of the difficulties encountered by boards looking for new talent. One chair described having to ask a search for the “other file” containing the female candidates after being presented with a list of only men.

Diversity challenges

It’s worth dwelling on where diversity sits in UK boardrooms. The Hampton-Alexander reviews offered a target of 33% of FTSE 350 boardroom posts to be held by women by 2020. Nearly all the companies in the index have met or exceeded the target. But most of the change has happened through the appointment of non-executives. There is hardly any change in the percentage of female executive directors, only 3% in the FTSE 350 as of 2017, according to the Chartered Governance Institute.

According to the Parker Review, 74 FTSE 100 company boards have a member from an ethnic minority. The rest are still to hit their “one in 2021” target. The FTSE 250 are under examination by the review this year and challenged to meet a similar target by 2024.

A separate survey, however, had less good news. The proportion of FTSE 100 chairs, CEOs and CFOs now is exactly the same as it was in 2014. “The snowy peaks of British business remain stubbornly white,” according to Trevor Phillips, chair of Green Park, the specialist consultancy behind the poll.

There is still work to be done. This new FRC report helps the business case for diversity but the argument, whether for gender or ethnic minorities, goes further. As the new report points out, there are “other important benefits to demographic diversity, such as increased firm reputation, greater corporate social responsibility, higher innovation levels…”

It’s also the right thing to do.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • The diversity narrative: a strategy for improved performance
    April 11, 2022
    Diverse group of colleagues celebrating

    Research has shown a clear correlation between diversity and performance. How can organisations create their own diversity narrative?

  • UK green finance report puts focus on transition plans
    October 20, 2021
    Rishi Sunak, Chancellor of the Exchequer

    Chancellor Rishi Sunak says requiring firms to disclose transition plans would help the UK to “set new global standards for sustainability”.

  • The war for talent: creating competitive advantage through diversity
    December 7, 2021
    Magnet attracting diverse talent

    Companies that strategically invest in diversity and building an inclusive culture will become talent magnets in today's challenging market.

  • It's time for boards to make new resolutions on ESG performance
    January 19, 2022
    Woman running up steps

    Recognition that significant change is needed and determination to drive progress are vital if boards are to improve sustainability.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

Board composition, diversity & inclusion, ethnic diversity, Financial Reporting Council, FTSE 350, gender diversity, nomination committees

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • ‘Fast-moving threats’ will soon challenge boards, warns CIIA
  • Meta faces US lawsuit over its corporate governance
  • News round-up: this week in governance
  • How to integrate sustainability into financial decision-making
  • Don’t let reporting requirements lead to boilerplate disclosures

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

Leadership ESG

Leadership in ESG Integration: a study into UK board oversight, implementation and disclosure

This research report is based on detailed response...
The Engagement Appeal: The Path to Inclusive Investor Engagement

The Engagement Appeal: The Path to Inclusive Investor Engagement

This is the inaugural white paper from The Engagem...
Mazars c-suite 2023

Mazars C-suite barometer 2023

The Mazars C-suite barometer is based on responses...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...
 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|