Decline in boardroom diversity at leading companies: Survey

DIVERSITY in the boardrooms of the UK's largest listed companies witnessed a significant drop in the past year, a new survey has revealed.

The decline occurred due to an increased focus on hiring experienced individuals during uncertain times, found out a survey by recruitment firm Spencer Stuart.

Spencer Stuart's 2023 UK Board Index revealed a substantial decrease in the proportion of first-time appointees, women, and individuals from minority ethnic backgrounds to non-executive director positions within the top 150 boards.

The representation of minority ethnic non-executive directors dropped by 44 per cent, women by 15 per cent, and first-time appointments by 30 per cent compared to the previous year.

At the level of chief executives and chairs, the survey noted that out of the 20 chief executive appointments during the period, only three were women, and no individuals from an ethnic minority background were appointed.

In contrast, this year saw double the number of chair appointments compared to the previous year, but only four of them were women, while 18 were men. In 2022, there were six female chair appointments compared to five male chair appointments.

Chris Gaunt, head of the UK board and chief executive at Spencer Stuart, said, "These drops suggest that diversity — in terms of gender, ethnicity, and fresh perspectives — has taken a back seat as boards turn to experienced listed company directors to meet these unprecedented times head on."

Additionally, the survey revealed that the average chief executive tenure decreased by 12 per cent from 2021, reducing to 5.1 years.

Gaunt noted that this decrease represented an 'uncomfortable paradox' since the challenges faced by UK boards, such as artificial intelligence and sustainability, were growing in complexity. However, company leaders had shorter tenures to make a significant impact.

Despite the decline in overall board diversity, the data indicated a positive trend in appointing women to newer positions. With the growing prominence of environmental, social, and corporate governance boards, 78 per cent of ESG chairs were women, marking the highest proportion to date.

The report also highlighted progress in line with the FTSE Women Leaders Review and the Financial Conduct Authority's 2022 goal to achieve 40 per cent female representation on boards.

In various roles, including chair, senior independent director, chief executive, or chief financial officer, 60 per cent of boards now had at least one woman, an increase from 50 per cent in the previous year.

Gaunt emphasised the importance of diverse boards. "More diverse boards clearly offer less risk of groupthink and more nuanced, true diversity of perspective and an ability to react in a multi-layered way to complex events. This needs to be a collective societal push, with investors and executive committees expecting diversity from their boards," he pointed out.