A report by Daily FX has found that there is not enough boardroom diversity among FTSE 100 companies, with male executives dominating their female counterparts.
According to the report, only six FTSE 100 companies have a gender split of over 50% female in their boardrooms. Ethnic representation is also low, with some boardrooms having no Black, Asian and minority ethnic (BAME) members at all.
So, which companies in the FTSE 100 are leading the way in terms of boardroom diversity? Are companies with greater boardroom diversity better for investors?
What is the importance of boardroom diversity?
With the topic of boardroom diversity gaining increasing prominence, a great deal of scholarly research has been done in recent times to highlight the relationship between boardroom and leadership diversity, and the success of a company.
Some of this research shows that there is a significant relationship between diversity and revenue performance in FTSE 100 companies. The study by DailyFX shows that FTSE 100 companies with female CEOs brought in $1.1bn (£0.8bn) more in revenue than male-led companies.
The same study also shows that BAME CEOs performed much better than white CEOs. BAME CEOs brought in an increase in revenue of $4.1bn (£3.1bn), where white CEOs brought in $1.5bn (£1.1bn).
Other studies on boardroom diversity more or less echo these findings.
One study in particular, from Glasgow Caledonian University and DeMontfort University, found that increasing gender diversity in FTSE 100 boardrooms had a ‘positive and significant effect’ on the financial performance of firms./
By analysing 12 years’ worth of financial data from FTSE 100 companies, the study found that companies with three or more female directors massively outperformed their counterparts with less diverse boards.
The message in all of these findings is clear. Inclusive and diverse leadership can only be good for FTSE 100 companies.
Right now, when many are struggling to maintain their footing in a COVID-19 world, diversity in boardrooms and in senior leadership is one way of ensuring that companies are drawing from the widest pool of talent possible. It could be just what is needed to foster speedier economic recovery and growth post-COVID.
Current statistics on boardroom diversity
Here are the best-performing FTSE 100 companies in terms of female board member makeup (alongside their BAME boardroom representation) according to DailyF:.
|Female board member makeup
|BAME boardroom representation
Auto Trader Group
Standard Life Aberdeen
In all of these companies, the percentage of female board members is 50% or more, with M&G leading the way with 57.1% female board members.
When it comes to BAME representation, most of these companies are seriously lacking. Indeed, out of these six companies, where female board membership is at 50% or more, only two have any sort of BAME representation.
Will we see more diverse boards in the future?
According to a World Economic Forum report, it may take up to 100 years to achieve global gender equality. But if some of the progress shown by FTSE 100 companies in recent times is anything to go by, it might not take a century to achieve gender equality in their boardrooms.
One key target of the government-backed Hampton-Alexander Review, for 33% of all FTSE board level positions to be occupied by women by 2020, has already been met (almost a year early).
So if progress continues at the current rate, I think we might see female board member makeup in all FTSE 100 companies hit 50% sooner rather than later.
However, more must be done to ensure that there is sufficient BAME representation in the boardrooms of FTSE 100 companies.
What are the implications of boardroom diversity for investors?
Needless to say, as an investor, the choice of stocks for your portfolio ought to be based on your preferences. At the same time, smart investors are those who can identify market trends and patterns, and take advantage.
So if your research shows that companies with more diversity in their boardrooms and in senior leadership are performing better revenue-wise, it makes sense to consider investing in them.
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