FTSE 350 Companies Hit New Records for Board Appointees, but Critical Leadership Roles Still Underrepresented by Women

Heidrick & Struggles (Nasdaq: HSII), the global provider of executive search and leadership advisory services, has published their annual ‘Board Monitor’, and first standalone UK Board Monitor, which provides an analysis and different insights into the board appointments that took place throughout the past twelve months within FTSE 350 companies.

Set against the backdrop of inflation, ‘The Great Resignation’, return to work, global supply chain challenges, an energy and cost of living crisis, conflict in Ukraine, and the Covid pandemic, the report finds that change – long promised – is finally filtering through.

Diversity, Inclusion and Representation

Best-in-class boards are building their networks and improving their outreach to potential directors from diverse ethnic backgrounds. At first sight, the share of seats filled by ethnically diverse directors looks good at 22%, and other research shows significant progress in the number of FTSE 350 boards that have appointed a director who is Black, Asian, or another ethnic minority, from 59 to 123 in just one year.

Although the report shows notable improvements in this regard over recent years, it is noted that none of the FTSE 350 board Chairs appointed last year were of non-white ethnicity.

And when it comes to gender balance, the report finds positive improvement overall, with 54% of new board seats filled by women. As the regulators and shareholders look beyond this headline improvement, though, it is notable that only 19% of the four roles that the FCA highlighted as particularly influential (CEO, CFO, Chair or senior independent director) are held by women today. As only a small share of CEOs and CFOs in these roles are women, which highlights the progress boards have made in gender parity but clearly shows that the leading executive positions are still male dominated.

Another growing demographic trend in the UK is the focus on socio-economic background. More than in other countries, such as the US, this is considered to be a strong factor when it comes to a person’s access to top jobs. Due to a lack of data availability in the UK, this is an emerging trend that both employers and boards are looking to better understand going forward to ensure that diversity efforts extend beyond the baselines of gender and ethnicity.

54% of board seats were filled by women over the past twelve months, which is the highest number of women directors since tracking appointments began. However, it is to be noted that these changes could be due to the fact that FTSE 350 companies are attempting to get ahead of the curve to align with the upcoming Financial Conduct Authority (FCA) regulation, which is likely to be implemented by 2025. The upcoming FCA regulation is likely to state that each FTSE 350 company must approach gender through the lens of influential positions, and have at least one woman in a CEO, CFO, Chair or SID position. Despite the urgency created by this guidance, the report found that 50% of FTSE 100 companies, and 46% of FTSE 250 companies continue to have no women in any of the four critical leadership roles.

Regarding the age of board members, the report found that directors over the age of fifty-five accounted for 60% of the seats, while 5% of these seats were taken by those under forty-five.

Alice Breeden, Partner and Co-leader of the CEO & Board practice, Europe and Africa at Heidrick & Struggles, commented: “It’s clear that external and regulatory factors have had a substantive influence on the pace of change in the British boardroom, such as ‘the nine year rule’ and FCA quotas, will have had a greater influence on the pace of change than the many commitments of intent that companies have made over the last five years.”

“While we welcome every step towards great diversity in the boardroom – we know that the challenge continues to intensify. With increased environmental, financial and socio-economic pressure, boards need to work harder than ever to ensure they create future-proof boards – boards that can deliver performance now and deliver for tomorrow on financial, social and environmental needs.

Future Preparedness and Risk Readiness

FTSE 350 companies gave a larger preference to those who lacked previous public board experience appointing many of who were first time directors. The report shows that in 2021, there was a new cohort of Chairs that saw 6% of Chairs appointed into new companies, increasing the prospect of fresh perspectives among boards.

External appointments brought fresh perspectives into boards, along with the first time directors. Of the sixty-four Chairs appointed in 2021, the report found that 58% of these appointments were external and of the ten Chair seats that went to women, 70% were external.

Kit Bingham, Partner and Head of UK Board Practice in Heidrick & Struggles, added: “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.

When this diversification of representation is added to the last number of years of incredible volatility – it’s been interesting to see a larger share of seats going to new directors with digital, financial risk and compliance, or cybersecurity experience. 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 go beyond the traditional CEO background.”

The Heidrick & Struggles UK Board Monitor report provides an in-depth analysis into the board-level appointments that took place across FTSE 350 companies in 2021. As a detailed analysis of theUK FTSE350 data set, this report offers a look at the status quo, as well as identifying the road ahead for public companies and their related sectors across the UK.