Two-thirds of FTSE 350 companies now have at least one board member from an ethnically diverse background – a significant increase from 45% in 2021. But businesses on the Alternative investment Market are failing to keep pace, a new study has found.
A study by Thomson Reuters (Annual Reporting and AGMs 2022) shows that the best-performing companies in terms of representation of different ethnicities at senior levels are in the FTSE 100, where 84% have at least one board member from an ethnically diverse background, compared with 55% in the FTSE 250. The study also looked at the composition of boards by gender. It found directorships of FTSE 100 companies were now comprised of 40% women, with 417 directorships being held by women in 2022. This was up from 2021, when women made up 39% of director positions. In 2020 the proportion was 35%.
Diversity at board level
Each FTSE 100 company now had at least two female board members, Thomson Reuters found. For the FTSE 250, 36% of total board positions were women (up from 32% in 2021 and 30% in 2020). Nearly a fifth of FTSE 250 companies (44%) disclosed that at least one of their executive directors was female, with overall average of executive positions held by women being 13% (compared with 16% for FTSE 100).
Companies have made considerable progress in achieving the Hampton-Alexander target of having at least 33% of female directors on boards, with just 16 FTSE 100 companies falling short.
Recommendations made by the FTSE Women Leaders Review that boards should be made up of at least 40% women have been met by 57 companies. This was a significant increase from 46 companies in 2021, the study confirmed.
AIM lags behind
In contrast, companies listed on the Alternative Investment Market (AIM) had not made nearly as much progress on diversity at board level as the main market: women make up just 20% of AIM UK 50 boards. Of the 354 board positions examined in the study, women hold just 72. Of these, 64 positions are non-executive directorships, with only eight executive director roles held by women. No AIM company included in the study had more than three women on its board.
Amanda Cantwell, senior editor, practical law at Thomson Reuters said: “AIM listed companies are subject to considerably less scrutiny than those listed on the main market. However, this doesn’t mean that they should not be aiming for greater inclusivity at board and senior management level.
“Studies have shown that companies which have more diverse representation at board level outperform less diverse competitors. At its current rate of progress in narrowing the gender gap, AIM companies risk falling even further behind FTSE 350 companies, which could cause considerable obstacles to growth.”
FTSE 100 progress
In the FTSE 100, five companies now have boards made up of greater than 50% women, compared with two in 2021. These are: Diageo (64%), Auto Trader (56%), Shell (55%), Admiral (55%) and Phoenix Group Holdings (54%). A further eight companies have boards in which women make up half of boards – F&C Investment Trust, Schroders, Pearson, Croda International, Rightmove, Centrica, Halma, and 3i Group.
Cantwell said: “FTSE companies have made considerable progress in improving diversity at board level – with markedly better representation of women and people from ethnic minority backgrounds.”
However, she added: “Despite improvements in representation the number of female board members who hold executive positions has failed to keep pace, with directorships held by women overwhelmingly made up of non-executive positions.”
In July this year a report found that FTSE 100 companies performed better than their US and Canadian counterparts in diversity and inclusion, but many employees still did not feel included at work.