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Another wasted year
Despite the Government setting a target of 33% women in leadership roles at FTSE 350 companies by 2020, and despite a flow of formal reviews, The fourth consecutive report, Women Count, produced by Pipeline shows there has been little to no progress. This independent report of the FTSE 350 has found that:
- Only 3.7% of companies have female CEOs – and this is down from 4.6% two years ago
- More than 85% of companies have no women executives on their main boards#
- Only 9% of executive directors on main boards are women, unchanged since 2017
- A mere 17.1% of executive committee members are women, a tiny increase of just 0.8% since 2018
- One in five companies have no female members of their executive committees at all
- At the current rate of progress, it will be almost 2090 before executive committees achieve gender balance#
- Just 5% of executive committee positions are held by women in roles with profit and loss2 (P&L) responsibility
- More than half of FTSE 350 companies have no women on their executive committees in a P&L role at all
- This situation is replicated on the main indices of major economies across the world, with India and Germany having no women CEOs at all, while China, Hong Kong, the USA, Spain and France have only one each
The fact is that many FTSE 350 companies are failing to offer talented women access to key executive positions as such opportunities continue to be given automatically to men.
Why does this matter?
Evidence shows that the failure to draw on a wider pool of ability actually damages the companies themselves. Those FTSE 350 companies with 25% or more women on their executive committees last year achieved an average 16% net profit margin3 while those with no women achieved just 6%. P&L roles are the pipeline for future CEOs and if women are blocked at that stage then they will not get the chance to run companies and companies will not get the chance to benefit from their broader talent pool.
Why don’t companies address the problems of gender imbalance?
Where there are already women at the top of companies, the evidence shows they are much better at progressing other female talent. Research reveals that women CEOs have twice the average number of women in executive positions than their male counterparts, and FTSE 350 companies led by women have an average of seven times more female executives on their main board than those led by men.
It is hard not to conclude that where men are in charge, they tend not to want to let go of their grip and allow women a share of the action.
6 Key Facts
1: Business performance is maximised when they promote women
2: Women on executive committees
3: It’s not just about numbers, the type of role matters
4: Female leaders succeed at progressing all talent, where male CEOs fail
5: Company boards remain a male executive preserve
6: Across the globe, it’s still a man’s world
- MAKE IT THE CEO’s RESPONSIBILITY
- ESTABLISH HARD TARGETS
- TRANSPARENCY IS KEY
Enough talk. We’ve heard it all before. Let’s just do it!
These words, a tweet from @LaraOyedele popped into my timeline in response to an article in Diversity Woman Magazine which revealed that, according to research by Bank of America Merill Lynch, “Gender equality can lead companies to make more money.”
This revelation is by no means ground-breaking. Our Knowledge Bank is full of research documents saying the same thing. Yet
Gender pay gap set to last for 36 years
Recent research by Easymoney suggests that the pay gap between top earners is unlikely to close until 2055. The research found that 79% of the 860,000 people earning over £100k pa are men. This has fallen only marginally since 2011, when 83% of the top earners were men.
Academics Geraldine Healy, Queen Mary University of London and Mostak Ahamed, University of Sussex have taken an in-depth look at the Financial Services Sector and identified that women, on average, earn 27.2% less than men an hour, whilst the bonus gap is nearly 50% (and 79% at Barclays).
Moreover, the lack of progress of women in Financial Services is a global phenomenon. IMF chief, Christine Lagarde said at Davos: “The numbers are just appalling … you have 20% of board members and 2% of CEOs who are women.”
2019 Pay Gap reporting reveals poor progress
This year’s Pay Gap figures indicate that far from the pay gap narrowing in the past year, it’s widened with four in ten private companies reporting wider gaps than last year. Surely it’s time for companies to publish Action Plans alongside data and narrative.
The pace of change is slow – let’s change that!
At a recent Lunch, I sat with 3 other women. By pure coincidence we were aged 75, 65, 55 and 45. Our conversation turned to the progress of women in the workplace. We concluded that (1) regrettably there has been much less progress than any of us anticipated and (2) none of us thought at the age of 25 that we’d be saying this 20, 30, 40, 50 years later.
Yes, it’s time to be a bit more Lara – LET’S JUST DO IT!
Are you earning what you’re worth?
– global executive gender pay gap falls dramatically to 8.7%
– UK gap nearly halves since March to 12%
– US leads the way with gap dropping to 2%
– CEOs have the biggest gender gap of 31%
– in Technology, gender gap has reversed in favour of women
Research published last November has highlighted the impact equality legislation is having on the gender pay gap for senior executives, with the global gap nearly halving to from 17.1% to under nine percent (8.7%).
While the UK is witnessing the largest narrowing of the gap – in the six months from March it fell from 21.5% to 12.2% – executive pay is noticeably more equitable in the US, where the gender gap decreased from 7.9% to 2% during the same period.
The findings have emerged from global analysis of remuneration packages of over 7,700 executives earning over $100,000 conducted by The Pay Index, the leading source for senior executive compensation and part of the international human capital specialist firm Leathwaite.
Before new regulations in the UK were implemented in April the gap was significantly larger. In the United States, last year’s introduction of legislation in several states which restricts companies from asking prospective employees about their existing pay has effectively given the country a six-month lead in the battle for pay parity.
James Rust, founder and managing director of The Pay Index said
These laws have put gender pay firmly under the spotlight. The Pay Index is providing us with an unrivalled insight into the current global gender pay gap – and with over 100 new executives adding their profiles every week, it’s allowing this on-going debate to be underpinned by real-time statistics.
However, there is still much work to be done to create parity, but the speed and direction of the trend is a very positive sign. We’re hopeful that in a further six months, the size of the gap we’re seeing in the UK will gravitate much more closely to those figures in the US.
It’s well documented that companies are facing increasing challenges to attract and retain talent – at all levels – due to skills shortages, high employment levels and increasing job opportunities. As such, companies with gender pay gaps will find it increasingly difficult to maximise their performance if they do not embrace pay parity. Pay parity is a positive thing for both individuals and business.
The Pay Index analysed trends within ten key industries over the last six months
- CEO … the gender gap has almost halved. Currently men receive 30.5% more vs March when they were paid 52% more than women
- Legal … the gender gap is falling. Currently men receive 29.1% more vs March when they were paid 35.4% more than women
- Technology … the gender gap has reversed in favour of women. Currently women receive 9.2% more vs March when men were paid 6% more than women
- COO / Operations … the gender gap has shrunk and is now almost non-existent. Currently women are paid 0.1 % more vs March when men were paid 11.9% more than women
- Sales, product, marketing and digital … the gender gap has almost halved. Currently men get paid 8.6% more vs March when they were paid 15.5% more than women
- Risk … the gender gap is falling. Currently men get paid 2.1% more vs March when they were paid 4.6% more than women
- Audit … the gender gap has narrowed but still favours women. Currently women receive 16.2% more than men vs March when they were paid 23.7% more than men
- Information Security … the gender gap has narrowed but still favours women. They currently receive 11% more vs March when they were paid 13.2% more than men
- Finance, Tax & Treasury … the gender gap has widened in favour of men. They currently receive 7% more vs March when they were paid 3.1% more than women
- Compliance … the gender gap has narrowed slightly but still favours women. Currently women receive 5% more vs March they were paid 6.6% more than men
- HR … the gender gap is falling, but in a function where there are more women employed than men, currently men receive 14% more vs March when they were paid 18.6% more than women
Check out your salary
About the data:
– the findings are based on the analysis of 7,708 senior global executives in September
– the respondents analysed lived in 452 different cities across 64 countries
– the original data set (3,912 respondents) was captured in March
– approximately half of the database work within companies with over 10,000 employees
– 90% of the database possess a Bachelors’ and / or Masters’ degree
– 86% of the database possess 16 or more years in industry
About The Pay Index:
The Pay Index, which is the leading source for senior executive compensation, is a wholly owned subsidiary of Leathwaite Human Capital Limited.
Leathwaite was formed in 1999 and is a leading international firm of human capital specialists with offices in London, New York, Hong Kong and Zurich. With a leading reputation for delivering exceptional executive search, executive interim, management consultancy and market intelligence solutions, Leathwaite is seen as a partner of choice for some of the world’s most innovative and ambitious companies.
Nearly two-thirds(61%) of women would take an organisation’s gender pay gap into consideration when applying for jobs , a new survey from the Equality and Human Rights Commission reveals.
The poll, commissioned to understand the impact of the gender pay gap on staff motivation and behaviour, also shows that 58% of women would be less likely to recommend their present employer as a place to work if they had a gender pay gap, and half of women say that a gender pay gap would reduce their motivation in their role and their commitment to their employer.
The findings suggest that businesses with larger pay gaps than their competitors are at risk of losing out on the best talent and suffering reputational damage if they do not take action to reduce it, placing them at a competitive disadvantage.
The Equality and Human Rights Commission’s Chair David Isaac, speaking at the ACAS Future of Work conference, said:
The message to all employers from your existing and prospective female staff is very clear from these results. They want action, and if they don’t see change there is a very real risk that they won’t join you or, most importantly, stay with you. It will also affect their commitment to you.
It’s crucial that all employers think seriously about this issue and demonstrate to their workforce that they are committed to closing the gender pay gap. A working environment which allows everyone to achieve their full potential is vital. If you don’t deliver on this you will fail to access a huge talent pool and will put your business at real competitive disadvantage.
Sam Smethers, Fawcett Society Chief Executive, said:
Most organisations will have a gender pay gap. What matters is whether their female staff, and those they want to attract to work for them, can see that an employer has an action plan in place to close it and is committed to driving change.
Ultimately, in a competitive jobs market women will vote with their feet. Employers need to take this seriously. Gender pay gap reporting is not going away and women expect to see progress.
Carolyn Fairbairn, CBI Director-General, said:
These data show just how important real action on closing the gender pay gap is. Of course women must have equal opportunity in the workplace and expect potential employers to deliver.
Gender pay gap reporting has shone a light on this important issue. Transparency is a potent tool for progress: what gets measured, gets changed. The litmus test of success is now what firms do to improve their scores and create more diverse and inclusive workplaces.
But the gender pay gap will not be closed by company action alone. Businesses want to work in partnership with the Government to provide better careers advice in our schools, improve technical education and offer affordable childcare for working parents.
- Women, people aged 16 to 34 and those from BAME backgrounds were significantly more likely to agree that their behaviour and motivation at work would be affected by a gender pay gap than men, older employees and white employees.
- For example, 56% of women said that their organisation having a gender pay gap would reduce their motivation in their role, whereas only 25% of men agreed with the same statement. 39% of men said that they would feel less proud to work for an employer with a gender pay gap, compared to 60% of women.
- The research also points to a worrying lack of substantive action taken by employers to close their pay gaps. It found that whilst 91% of employees had heard of the gender pay gap, almost half had not read or heard any information about their organisation’s own gap and a quarter of employees think their employer should be doing more to tackle it.
- Around three quarters of respondents (80% of women and 69% of men) would be willing to take part in actions and activities to help their employers tackle the gender pay gap.
- However, a quarter of respondents didn’t feel at all able to influence their employer’s response to tackling the gender pay gap, raising further concerns about a lack of action leading to staff disengagement.
- Employers should produce action plans with specific targets and deadlines alongside their pay gap figures, which clearly set out what their data has told them and what action they will be taking to close their pay gaps.
The majority of the UK’s largest companies have adopted policies on boardroom diversity but their reporting to stakeholders needs to improve.
Research conducted for the Financial Reporting Council (FRC) by the University of Exeter Business School shows that only 15% of FTSE100 companies fully complied with the UK Corporate Governance Code’s provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives for implementing the policy, and progress on achieving them.
The FRC’s analysis shows that FTSE 350 companies’ approaches to diversity are wide ranging. While some do demonstrate a deeper understanding of diversity as an issue of strategic importance, the great majority appear to treat reporting as a compliance exercise, suggesting a lack of commitment.
The revised UK Corporate Governance Code, which takes effect from 1 January 2019, require improved reporting on diversity. It calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company’s diversity policy including how this links to progress on achieving company objectives.
The revised Code has a renewed emphasis on succession planning and diversity reporting, encourages boards to think beyond gender diversity and to act to ensure appointment and succession planning practices promote diversity more broadly. The changes encourage companies to build diversity across their workforces to feed the development of a diverse pipeline for succession to senior management.
Board Diversity Reporting in 2018 provides a snap shot of diversity reporting across the FTSE 350 and identifies examples that lead the way in terms of quality and approach.
The key findings of the research include:
98% of FTSE 100 and 88% of FTSE 250 companies have a policy on board diversity, a considerable improvement since 2012 when this was first included in the UK Corporate Governance Code.
However just 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current UK Corporate Governance Code.
Some companies are embracing the spirit of diversity in their narrative reporting but many need to develop a clearer strategy to drive greater diversity at senior management level.
Tracy Vegro, FRC Executive Director of Strategy and Resources said
There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group think. Some of the findings of this report are disappointing and FTSE 350 companies should provide fuller disclosures on all diversity.
We expected to see more of our largest companies providing greater information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code. To maintain a competitive edge and success over the long-term, UK companies need to consider how diversity and inclusion is relevant to the markets in which they operate, all their stakeholders and the communities they serve.
We are writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it.
Minister for Women, Victoria Atkins said:
It is essential that we maximise the contribution that women make to our economy – if we want our organisations or projects to succeed we had better include women. There are more women in work than ever before; more women-led businesses; more women on FTSE boards; and, more female MPs than ever before. In 2017, we introduced ground-breaking regulations, requiring large companies to publish their gender pay gaps.
But only about a quarter of FTSE 350 board positions are occupied by women, with eight all male boards still existing. We must continue to show that in today’s fast paced, competitive market, we are driving towards diversity in boardrooms.
Professor Ruth Sealy, Associate Professor of Management, Director Exeter Centre for Leadership, University of Exeter, said:
Our research revealed some companies’ sophisticated understanding of the contribution diversity can make to their business – as the optimal utilisation of talent and a significant strategic issue. However, many organisations appear to still have a minimalist ‘tick box’ approach and need clearer strategies to drive greater diversity at senior management levels.