In 2024, statistically, it is still the case that the majority of UK board directors are white, male and over 60. So, what does this say about diversity on UK boards? Although there is a clear positive shift in attention from businesses, government, and boards regarding diversity issues, the transition to more diverse representation on UK boards is proving to be gradual.
UK board diversity statistics
Previously, I discussed in detail the six strands encompassing the board diversity spectrum and why it matters when applying for board opportunities. These six strands are:
- Gender
- Ethnicity
- Religion
- Age
- Sexuality/Transgender
- Disability
Depending on their industry and customers, some boards should also consider socioeconomic status and education as additional strands of board diversity.
The 2023 UK Spencer Stuart Board Index reviewed the largest 150 companies with a premium listing on the London Stock Exchange. These are some of the findings from the report.
The Index Statistics
- 13% of board members identify as minority ethnic
- Women hold 40% of all board seats. However, when we break it down by role, 46% of all non-executive directors are women, and only 16% of executive board members are women.
- 53% of companies had at least 40% female representation on their boards
- The average age of non-executive board directors is 60.9, and for executive board directors, it is 54.9. The last ten years have remained the same.
Positive Trends
- There were just 6 FTSE 100 companies without at least one minority ethnic director on their board. This is a huge increase from 2017, when only 51 of the FTSE 100 companies were without at least one minority ethnic director.
- The proportion of all board seats held by women has grown steadily from 28% to 40%
- 53% of companies reached the 40% target for women on boards (recommended in The FTSE Women Leaders Review), up from 46% in 2022.
Negative Trends
- Only 31% of newly appointed NEDs were first-time directors, compared with 44% in 2022.
- There was a drop in the number of appointments of new ethnic minority non-executive directors from the previous year.
- The proportion of women among all first-time directors has declined from 54% in 2022 to 45%.
There have been some positive trends regarding the board diversity of the top listed companies in the UK over the last 5 to 10 years. However, some key targets and objectives seem to have stalled somewhat in 2023, particularly regarding gender and ethnicity diversity. This is likely due to boards being nervous about post-COVID, economic, and cybersecurity issues and reverting to old practices of appointing trusted and experienced directors who have proven they can manage risk.
Unfortunately, the average size of boards has remained the same, as has the percentage of independent directors on boards and the average age of directors for the FTSE 150 companies.
What is contributing to diversity on UK boards?
Government Supported Reviews
The FTSE Women Leaders Review is an independent, business-led framework supported by the government that sets recommendations for Britain’s largest companies to improve women’s representation on boards and leadership positions. This review recommends that by 2025, 40% of board positions should be held by women. The FTSE 100, FTSE 250, and FTSE 350 have all reached this target.
The Hampton-Alexander Review called for a target of 33% female representation on all FTSE 350 Boards by the end of 2020. The FTSE 100, FTSE 250, and FTSE 350 organisations have all reached this target. Plus, there are no longer any all-male boards in the FTSE 350.
The Parker Review is an independent review that evaluates how to improve the ethnic and cultural diversity of UK boards to reflect better their employee base and the communities they serve. The core recommendation was for UK organisations to commit to “One by 21” – FTSE 100 boards to have at least one director from a minority ethnic background by December 2021. The good news is that the target has nearly been achieved. The 2024 report showed that 96 FTSE 100 companies had at least one director from an ethnic minority group.
In addition, the Parker Review set a target for FTSE 250 companies to have a minority ethnic group director on their boards by December 2024. Good progress has also been made here, with 70% already meeting the target.
Recognition that a diverse board is a successful board
It is now commonly regarded that board diversity improves the performance of boards and the organisations they represent. Boards are the ultimate decision-makers for their organisations, and competency is critical to their successful operation. This level of competency comes from experience, knowledge, skills, attitudes, values, and beliefs. Diverse board members can positively influence these factors.
Boards acknowledge that a focus on diversity is essential for the board’s overall ability to provide strategic leadership and governance. More diverse boards operate more collaboratively with the ability to consider a greater range of solutions and provide access to broader social capital and resources. The FRC report, Board Diversity and Effectiveness in the FTSE 350 Companies found that diversity on UK boards has resulted in better financial performance, higher stock returns and less shareholder dissent.
External stakeholders and consumers demanding change
Organisations are increasingly being held accountable by their stakeholders. It has never been more critical for them to take action to promote diversity, equality, and inclusion. Customers and employees pay attention and decide where to spend their money and where to work based on these actions, principles, or policies—or lack thereof.
A shift in skill sets requiring new (often diverse) board executives
Boards are confronted with new challenges. Gone are the days when only lawyers and accountants sit on boards. Every week, as I look through the new board vacancies posted on the website, I notice the skill sets, experience and expertise sought after in new directors are changing. The search for finance and accounting skills is decreasing, seeing the rise for those with technology, healthcare, marketing, change management and property experience.
Business acumen and the ability to understand business financials are still necessary. However, board members must bring the knowledge and experience to keep up with their organisations’ daily digital, cultural, and people challenges to provide strong governance outcomes and mitigate risk. To accommodate the need for these new skills and experience, organisations must widen the search, which often encompasses diverse and/or first-time candidates.
New organisations tend to select diverse talent
Organisations and boards in the earlier stages will likely be more diverse-oriented when appointing their executive team and board members. These organisations are often established or driven by younger executives who acknowledge the diversity of the communities they serve and the employees they mentor.
What is holding us back from achieving diversity on UK boards?
Time and Tenure
Unlike executive positions, non-executive positions are fewer and have lower turnover rates. The average non-executive director’s tenure in the UK has been stable for most of the last decade, at around 4.3 years. So, unless boards expand, it will take time to see true diversity across most UK boards.
The Chair
In a previous article, I explained why the chair is the key to most board appointments. The chair has substantial input into the selection criteria for a new board director and often has the final say regarding who is appointed. Most chairs have been in their positions for many years, and old-school chairs are less likely to prioritise diversity over other attributes. This will legitimately only happen as new diverse chairs are appointed or chairs are pressured into revising the diversity on their board.
For diverse board leaders, we need diverse feeders
Most organisations’ CEOs or COOs also sit on the board. 51% of organisations seek candidates with CEO or COO experience when appointing a new non-executive director. A 2024 Senior Management Ethnic Diversity Review found that only 12% of the senior management of the FTSE250 companies were ethnic minorities. A 2024 Women Leaders Review found that for the FTSE 250 and Top 50 Private companies, women held 35% and 36% of senior management roles, respectively.
We need to see more diversity within these senior executive management roles before this traditional pipeline of feeder board talent will impact the diversity of UK boards.
Diversity is not the highest priority
The Spencer Stuart Nominating/Governance Chair Survey 2024 surveyed 83 S&P 500 and MidCap 400 nominating/governance committees. The results from these influential committees revealed some troubling insights into prioritising diversity as a factor when replacing board members. Only 20% prioritised ethnic diversity, and 14% prioritised gender diversity
Board recruitment practices do not always favour diversity
We know that 65% of all board appointments in the UK are made via a personal connection. Considering UK boards, it is safe to conclude that many board directors are graduates from one of the top 10 UK Universities, Alumni of an elite private school, or have started their careers with one of the big four accounting firms. Diverse candidates are likely outside these people’s first —and second-degree connections and, hence, unlikely to be considered in the board appointment processes.
Conclusion
The conversation and push for diversity, in all its forms, on UK boards is still at the forefront for many in the government, in academic circles, in the community and with stakeholders. However, many boards’ main focus revolves around making gender and ethnic diversity targets. Whilst we are seeing progress in these areas (which is sterling), we must remember that diversity is far broader.
UK boards genuinely acknowledge that diversity matters and recognise the strategic benefits of having a diverse board. The intent is often there, but the execution could be better. Over the last five years, it is clear that there has been a significant change in attitude. A comprehensive board diversity study covering all board and organisation types would indicate how far we have come and where more work needs to be accomplished.
Government boards in the UK are far more diverse due to strict recruitment policies and guidelines. Regarding the private sector, it should not require diversity targets or mandatory compliance to encourage organisations to revise their diversity culture on their boards.
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About the Author
David Schwarz is CEO & Founder of Board Appointments – The UK’s leading board advertising and non-executive career support firm. He has over a decade of experience in putting people on boards as an international headhunter and a non-executive recruiter and has interviewed over one thousand non-executives and placed hundreds into some of the most significant public, private and NFP roles in the world.