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On 22 February 2022, the FTSE Women Leaders Review its first report, which sets out new recommendations for improving female representation in FTSE 350 companies, as well as 2021 data on female representation in both the FTSE 100 and the FTSE 250. The review, which was by the government on 1 November 2021, builds on the work of the earlier Hampton-Alexander and Davies Reviews, being the ‘third and successor phase’ to the two reviews that came before it. Like its predecessors, it is to last five years.

The four new recommendations are as follows:

• an increased voluntary target for FTSE 350 Boards, and for FTSE 350 Leadership teams to a minimum of 40% women, by the end of 2025

• FTSE 350 companies to have at least one woman in the chair or senior independent director (SID) (role on the board, and/or one woman in the chief executive or finance director role in the company, by the end of 2025

• key stakeholders to set best-practice guidance, or have mechanisms in place to encourage FTSE 350 Boards that have not achieved the prior 33% target, to do so

• the scope of the review is extended to include the largest 50 private companies in the UK by sales

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Women on boards

The review’s report also addresses the subject of female representation on boards, stating that 85% of FTSE 100 companies have now exceeded the Hampton-Alexander Review’s female board representation target of 33%, with women holding 39.1% of director roles in the FTSE 100 (414 out of 1058 directorships). Moreover, it notes that female representation in senior board roles continues to increase, with women now holding 16 chairs and 32 female senior independent directors (SID) in the FTSE 100. Almost half of the FTSE 100 now have at least a female chair or SID. The report, however, mentions that the number of female chief executives remains ‘stubbornly low’.

This latter point is addressed by Gareth Sykes, Herbert Smith Freehills’ UK Head of Corporate Governance Advisory:

‘The adoption of more ambitious targets by the FTSE Women Leaders Review builds on the continued progress made towards the Hampton-Alexander targets but also highlights that work remains before gender-balanced boards and leadership become the norm among FTSE 350 companies. In particular, the number of women appointed as CEO remains stubbornly low. As the FTSE Women Leaders Review notes, there has been virtually no progress in this area over the last ten years. The expansion of the recommendations to include a specific target on women in the most senior leadership roles is therefore perhaps not surprising and aligns one of the proposals contained in the consultation on board diversity published by the FCA last July.’

It is a similar story in the FTSE 250, with the percentage of companies exceeding the Hampton-Alexander 33% target increasing to 77.2%. In addition, women now hold 36.8% of directorships (724 out of 1,970), as well as 32 and 83 chair and SID roles respectively.

The annual reporting of the Auto Trader Group and BHP Group

One of the most improved companies highlighted in the review is the Auto Trader Group plc (Auto Trader Group), which in 2021 improved on both its female board representation (55.6%) and combined executive committee & direct reports (tracking representation of women in leadership positions) (36.3%). This is an increase on the data outlined in Auto Trader Group’s , which puts board representation at 50% and the representation of women in leadership positions at 34%, the latter being calculated in accordance with the definitions outlined in the Hampton-Alexander Review. However, the report also shows that the Auto Trader Group’s female employees as a percentage of the company’s total workforce has flatlined at 39% for its past three financial years (March 2019–March 2021).

Another interesting case is that of BHP Group Plc (BHP Group), which, according to the review, in 2021 saw its female board representation fall to 20% (two women on a board of ten). This led the Anglo-Australian mining company to come second in the review’s top ten poorest performers in the FTSE 100 ‘Women on Boards’ section.

However, this does not tell the whole story, as BHP Group’s 2021 shows 12 board members, four of which are female. This divergence is explained by independent non-executive directors (NEDs), Susan Kilsby and Anita Frew, both deciding to from the BHP Group’s board after its AGM on 14 October 2021, leaving the mining company in the lurch in terms of diversity and bringing its board below the Hampton-Alexander Review’s 33% target.

More interesting still is the fact that the exit of the two female NEDs was due to the appointment of both to chair positions in other companies (Kilsby at Home & Security Inc and Frew at Rolls Royce Holdings plc), thereby stretching their time commitments beyond what would allow them to continue serving on BHP Group’s board. This in turn raises questions of overboarding, especially for female directors, who are often in high demand among FTSE 350 companies. It seems that BHP Group’s diversity loss was Home & Security’s and Rolls Royce Holdings’ diversity gain. BHP Group has since tried to remedy the situation, with Catherine Tanna to be to the company’s board as a NED from 4 April 2022.

However, the review does recognise in its report that despite the fall in BHP Group’s female board representation, it has this year made great strides in hiring women in other areas. In 2021, BHP Group saw not only the proportion of women in leadership roles in the company more than 12 percentage points to 39.4% (just short of the 40% target), but also a 2.7% in female representation within the company more generally during its FY 2021 (women now making up 29.8% of BHP Group’s workforce).

This emphasis on the importance of female representation below the level of the boardroom is shared by Tom Proverbs-Garbett, senior associate at Pinsent Masons:

‘Progress at board level is welcome, but focus on the executive and direct-report demographic is as, if not more, important. After all, it is in experience of performing at this senior level that a deep pipeline of talent is developed across an industry. This should be a concern for all boards. Principle J of the UK Corporate Governance Code requires effective succession planning for board and senior management, based on objective criteria and which promote diversity. It is positive that the review found the representation of women in the combined executive committee and direct reports category now stands at 31.5% (2020: 29.4%), but that means going forward there are roughly twice as many men as women with this experience. Serious thought needs to be given at the top of every organisation into ways of developing and progressing women into those senior roles.

Half of all FTSE 100 Boards now have a woman in either the chair or senior independent director role. One might expect this state of affairs to influence, over the next two to three years, the number of female CEOs, the statistic that is still to move.

While the report suggests that the UK's voluntary regime is working as planned—and progress has certainly been made—in international terms, the rest of the top jurisdictions (in terms of percentage of women on boards) have set quotas for participation. The report makes clear that some of these countries began their efforts earlier than the UK, have had quota legislation in place for many years, and are measuring progress against a much smaller number of companies than the UK. However, in terms of speed of response, the question of mandated diversity remains live. Traditionally, this is not the way of UK regulation, but as new generations join the workforce, the speed of change will come under scrutiny.’

 What is next for the FTSE Women Leaders Review?

The findings of the review’s first report have been welcomed by various commentators and institutions, including the Association of Investment Companies, which the prevalence of investment trusts among the top performers in the report.