There’s good and bad news about board appointments. An analysis of positions filled at FTSE 350 firms in 2021 finds more than 54% went to women. But only 19% of the top board roles—chair, chief executive, chief financial officer or senior independent director—went to women.
The survey findings, produced by headhunting firm Heidrick & Struggles, reveal a picture of boards changing to deal with regulatory and societal demands. There is much to cheer in the news that women took the balance of new roles, though there may be concern in some quarters that they are not winning more of the top jobs.
Listing rules for the Financial Conduct Authority (FCA) call on boards to appoint a woman to one of the four top board roles: chair, chief executive, chief financial officer or senior independent director. The FCA also wants 40% of board positions to be held by women, which may explain recent recruitment trends. However, only 19% of new chairs appointed in 2021 were female.
When it comes to ethnicity, 78% of new appointees were white, 17% were Asian or Asian-American, while just 5% were black.
More directors were appointed with international experience (52%) or social media and digital knowledge (34%); more, in fact, than those with the customarily favoured background of financial risk and compliance (29%).
Sustainability know-how was also popular (15%), as was cybersecurity insight (10%).
‘Landmark year’
Kit Bingham, head of board practice at Heidrick & Struggles, says some observers may be disappointed by the figures, but adds that they should be seen in context.
“Many may be frustrated by the pace of these seemingly incremental improvements, particularly when it comes to overall gender and ethnicity representation, but this remains a landmark year for new board appointments.”
Appointments, he says, may reflect concern about the current business landscape. “Looking at the trends that emerge overall, it’s clear that the uncertainty of today’s operating environment underscored the long-standing need for diversity of representation, perspective and skill sets and many boards today are actively looking for directors with broader profiles that beyond the traditional CEO background.”
For Alice Breeden, co-leader of board practice at Heidrick, the stress is unlikely to lift on boards given the current environment. “While we welcome every step towards greater diversity in the boardroom—we know that the challenge continues to intensify,” she says.
“With increased environmental, financial and socioeconomic pressure, boards need to work harder than every to ensure they create future-proof boards—boards that can deliver performance now and deliver for tomorrow on financial, social and environmental needs.”
In March, the Parker review revealed progress on ethnic diversity in the boardroom but some companies struggling to fulfil the “one-by-21” target of one non-white board member in every FTSE 100 company.
Research earlier this year found that women held only 13.7% of executive director roles in the largest companies.
Diversity is improving, there is regulatory and societal expectations, and companies are making gradual progress. Laggards may want to consider their approach.