Sunday, June 16 2024

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Director level talent will continue to show lack of diversity.

Research from the ICSA: The Governance Institute, London Business School’s Leadership Institute and Elisabeth Marx Associates, suggests there will be little change in the C-Suite in coming years with a lack of genuine diversity set to continue.

Based upon comparative research with ‘A View at the Top’, which looked at the composition of FTSE 100 boards in 1996, this latest research finds that, while there has been progress in gender diversity at non-executive director level, boards remain more obviously male, as well as significantly whiter than the British population. What is more, directors are increasing in age, with little diversity in terms of educational or career background.

According to Professor Randall S Peterson, academic director, London Business School Leadership Institute the picture looks set to continue as next generation directors are equally as elite-educated and male as current executives:

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“In many of the headline-grabbing areas that the initial 1996 research uncovered there has been genuine and sometimes radical change, such as the increase of female directors from 4 per cent to 28 per cent and international experience in the boardroom climbing from 24 per cent to 57 per cent,” says Professor Peterson. “In other areas, however, little has changed: a quarter of all directors are educated at Oxbridge or Harvard and the percentage of female executive directors has climbed from one per cent to just three per cent. Alarmingly, in some ways the boardroom is becoming significantly less diverse, such as the increase in the percentage of directors with a background in finance and a growing lack of international experience, which could potentially narrow the focus in British boardrooms.”

 

Board changes between 1996 and 2017 are as follows:

 

  • The average board size has reduced to 11 directors from 12, of which 26 per cent are executives and 74 per cent are non-executives, compared to 49 per cent executive and 51 per cent non-executives in 1996
  • 28 per cent of board directors are women compared to 4.1 per cent in 1996
  • The average age of a FTSE 100 board director is 58.5 years compared to 56 in 1996; non-executive directors are on average 60 years old and executives 53 years of age (unchanged from 1996)
  • Directors with an accountancy or finance background predominate (49 per cent, up from 38 per cent)
  • 57 per cent of directors have international experience, more than twice the percentage in 1996 (24 per cent)
  • The majority of board directors are university-educated and a considerable number hold degrees from top international universities and business schools (including Oxbridge, Edinburgh, Harvard and other top US universities, and international business schools such as INSEAD and LBS)
  • The most admired companies in 1996 as well as in the present tend to have more females, more executive directors and the boards are less heavy on finance backgrounds.

 

“Since I first reported on the state of FTSE 100 boards, board size has reduced, particularly in terms of the number of executives,” says Dr Elisabeth Marx of Elisabeth Marx Associates. “This raises a number of important questions about how well the non-executives know the executive bench strength and the extent to which CEO selection might be affected by direct in-depth exposure to fewer executives. Moreover, the prevalence of directors with an accountancy/finance background carries a risk that Nomination Committees might be recruiting in their own image and are not sufficiently diverse to look at the broadest range of non-executive candidates. We need a much broader definition of diversity, reflecting the complexity of business and addressing a wider set of diversity criteria all at the same time, rather than a ‘piecemeal’ approach.”

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