Women accounted for more than half of appointments to boards in the past financial year as the UK’s largest companies addressed gender disparities, but progress on ethnic diversity among company directors stalled.
The number of black, Asian and minority ethnic directors stayed broadly the same across the 150 biggest listed companies at 8 per cent in the year to April, according to the annual boardroom report from Spencer Stuart, the executive search firm.
Although the number of new Bame non-executives has almost doubled in the past five years, the number of executive directors has halved to 2.6 per cent. UK companies trail counterparts in the US, where ethnic minority directors represent about a fifth at the top 200 S&P 500 companies.
Nazneen Rahman, non-executive director at AstraZeneca, said: “2020 has been a watershed moment for racial inequality, and to catalyse substantive and meaningful change, these companies need to demonstrate action to not only increase Bame representation around the board table, but also to foster the Bame talent within their own ranks.”
Several initiatives were launched in October to encourage companies to recruit senior managers from ethnic minorities, including a scheme to find 10,000 black graduate interns, and a charter for financial and professional services.
The 2020 UK Spencer Stuart board index shows that better progress has been made on gender diversity, with women accounting for 34 per cent of board directors and 46 per cent of non-executive directors, a three-fold rise since the last financial crisis.
However, women only made up about 13 per cent of executive director positions, and five per cent of chair and chief executive roles.
Tessa Bamford, who leads Spencer Stuart’s UK board practice, said: “The fact that 46 per cent of all non-executives were women at the start of the Covid-19 crisis suggests that companies may be experiencing more effective scrutiny and challenge of the ‘group think’ which was associated with poor decisions in the last financial crisis.”
The Spencer Stuart index covers the largest 150 companies in the FTSE rankings by market value at 30 April 2020, excluding investment trusts.
Boardroom pay continued to climb in the 12 months to April. The average wage for a chair stood at £411,406 — an increase of almost 2 per cent from 2019 — while average total fees rose 1.3 per cent for non-executive directors to £97,837.
Spencer Stuart said that within this was a wide range of fees for part-time chairs, from £35,000 at Fresnillo to £1.5m at HSBC.
The study also found that only about half of the biggest companies on the London stock market have adopted at least one of the three recommended ways under the UK corporate code for them to engage with their workforce over decision making.
Under the 2018 code boards are required to consider the workforce in discussions by either appointing a director from the workforce, creating a formal workforce advisory panel or having a designated non-executive director.
None of the 150 biggest listed companies has appointed a director from the workforce to ensure engagement, according to Spencer Stuart. About half appointed a designated non-executive director, while 7 per cent of boards have created a workforce advisory panel.
The code says that if a board does not choose one or more of these methods, it must explain what alternative arrangements are in place and why it considers that they are effective. It is unclear to what extent the companies that have not taken any of the three steps have explained their alternative arrangements.