FTSE 350 board appointments dropped in number during 2022 as economic uncertainty took hold and boardroom jobs went to those with experience and familiar skills. The number of first-time directors dropped sharply.
The Heidrick & Struggles boardroom survey shows that non-executive board appointments fell 23% last year, to 342. First-time directors fell from 36% to 28%. Directors appointed with prior board experience stood at 72% of the total, the highest level since 2019.
The picture shows boards exercising caution while managing companies against a backdrop of geopolitical uncertainty, rising interest rates and soaring inflation. Brexit too remains an issue to be navigated.
As boards adjust their membership, Heidrick says other exceptional figures emerged. For example, 49% of non-executive jobs went to sitting executives compared with retirees, a rise of 9% year-on-year.
The age profile is changing, too. There are far fewer appointments to those under the age of 55: only 28% last year compared with 40% in 2021. A record 58% of new appointees were women.
According to Kit Bingham, head of the UK board practice at Heidrick, the sheer array of challenges currently facing directors may be the driver of current trends. ESG, DE&I, digital transformation, cybersecurity and delivering returns make up a host of issues currently facing board leaders.
“Given this backdrop, it is perhaps no surprise that boards have prioritised the appointment of experienced senior leaders with current, active experience at the top of business,” Bingham says.
There are, however, stark warnings for boards. Alice Breeden, Heidrick’s European chief executive, says boards should continue to seek members from a wide range of backgrounds, experience, knowledge and capabilities. At 24%, the figure for board seats going to people from ethnic minorities was only a slight increase on last year. There has also been a renewed interest in “British” directors, with appointments from other nationalities falling.
‘Retrenchment’
“Whilst we recognise the benefits and potential pressures of appointing experienced leaders in the current operating environment, any form of retrenchment to traditional skills and experiences should be seen as a step backwards for progress,” Breeden says.
“Despite the economic climate, there is a need for increased diversity—rather than less [diversity]—to solve the system-wide problems facing businesses today.”
The research helps to build a picture of how boardrooms are responding to the economic landscape, in which Heidrick sees an emphasis is being placed on business continuity.
The research suggests that, in their search for security in uncertain times, boards may be becoming more conservative, or at least putting a brake on progressive change. That may feel like a safe place at the moment but, with other issues looming, such as climate change and cybersecurity—appointments of directors with specific skill in these areas fell—that may prove problematic for some companies.