FTSE350: A Golden Opportunity To Focus On Gender Diversity And The Role Of Chair
Succession planning is an opportunity, a tool to ensure evolutionary thinking on business strategy and alignment going forward. In turbulent times, it requires innovation.
Britain has been talking loudly about the need for gender diversity in its boardrooms and the progression of women in the workplace for the last decade. The UK’s revised Corporate Governance Code (July 2018) states that the chair should not serve on the board for more than nine years.
In the FTSE 350 today, there are 137 companies with a chair that has served on the board for more than eight years and 110 that are non-compliant with the Code. The overwhelming number of chairs with eight or more years service in the board are male (97.81%) and there are 22 female board chairs (6.29%) - of which one has served for more than nine years and three have served for more than eight years. Clearly, new blood is needed in the role of Chair in the FTSE350.
UK Board Chair Tenure 2019, research by Minerva Analytics, the governance consultancy, reveals that almost 40% of the top 350 UK companies will need to look at succession planning for their Chair role soon. Over 31% of them are currently non-compliant with the Code’s recommendation on Chair tenure.
Importantly, the research states that the new Code is already having an impact on succession planning. In January 2019, Babcock International Group cited the introduction of the Code as a contributing factor for Mike Turner’s decision to retire from the Board after 10 years in the role.
Witan Investment Trust (FTSE 250) has also announced its Chair Harry Henderson is to retire in 2020, after being a non-executive director for 15 years and then Chair for 16 years. Imperial Brands, the FTSE 100 tobacco company, recently said it had begun a search for a successor to chairman Mark Williamson, who has been on the board since 2007. That comes in response to the new code. As the FT reported, nearly a fifth of shareholders voted against his re-election at the group’s recent annual meeting.
When the Financial Reporting Council (FRC), the corporate governance watchdog, revised the Code, it allowed for the extension of the period of tenure from when a chair is first appointed to the board beyond nine years, for a limited time - with a clear explanation provided. (Provision 19). This was done in part to allow women to move into the Chair role once they had been in the increasingly important role of Chair of RemCom or Audit committees as non-executive directors. As the FRC stated, it was “to facilitate effective succession planning and the development of a diverse board.”
However, the status quo is that more men than women secure a role as chair without previous experience on the same company board, as noted in the Minerva Analytics report. That points firmly to the succession planning process, external candidates, headhunters and the thinking in boardrooms.
Institutional investors, however, are increasingly voicing concerns about gender diversity and about the ongoing independence in the longevity of some appointments.
Apart from the largely uniform picture of UK FTSE350 Chairs at a time when cognitive diversity is considered to be increasingly important to business there are interesting questions to consider about the role of the Chair in the boardroom, and the extent to which it is changing, dictated by the needs of business.
In 2018, on Board Talk, I covered research by INSEAD, the business school, on the practices of board chairs across the world.
This is how the post began: “Looking at the UK findings, it is clear that it is a role that will become more vital both for its 'indirect' leadership, and for its ability to deal with change. Technology skills will be a requisite for all board chairs in ten years, and more will come from technology, consulting or academia, rather than the traditional executive background…..They will be younger, and we will see more of them in their 40's. In the UK, Italy, and Denmark, there will be a rise in foreign chairmen. As for women - they will still be in a minority, but the report predicts a ‘marked improvement’ by 2027.” Read on.
It’s too far away - 2027. Action, not words on gender diversity is what investors are calling for, louder than ever before. This latest research shows there is a crying need for the FTSE350 to start worrying whether it looks perilously out of touch from the Chair down and to do some multitasking - by focusing harder on succession planning, while also considering its need for talent in a diverse and fast-changing world.