Why women count

September 2020

PQ magazine takes a look at the clear evidence that FTSE 350 boards still have a mountain to climb when it comes to diversity. And this inaction is hurting the bottom line!

When the financial year closed there were more FTSE 100 CEOs named ‘Peter’ than women leaders in these roles.

This, say the co-founders of The Pipeline, is simply ‘scandalous’. Margret McDonagh and Lorna Fitzsimons point out that UK-listed companies are also much more profitable when women make up more than one in three executive roles. That means the British economy and shareholders have missed out on a gender dividend of £47 billion in pre-tax profits, enough money to keep the NHS running for a full five months.

New research published in The Pipeline’s ‘Women Count 2020’ report shows where at least one-third of the bosses are female the profit margin of listed firms is a whopping 10 times that of those without.

However, the report explains in the 350 biggest British plcs fewer than two in 10 CFOs are women, only 4% of investment managers are women, and just 5% are led by a female CEO.

Former Prime Minister Theresa May says there can be no good explanation for the massive underrepresentation of women at the top of British business – so it must change. She said: “That needs buy-in from the top. Every single male CEO who looks around his boardroom table to see nine out of 10 male faces staring back at him needs to ask himself what he is doing to make his business one which his daughter or granddaughter can get on in.”

Accountant Lord Bilimoria said gender diversity at the top levels of UK businesses requires ‘urgent attention’. While progress has been made with non-executive representation on boards, the same he felt could not be said on the executive side, where progress has remained slow.

He went on: “The report shows how failure to develop and promote women into CEO or C-suite roles has serious consequences, not least for profitability.”

The reports executive summary picks four main themes, which are:

Lost profits

FTSE 350 companies that have executive committees with female membership of more than 33% have a net profit margin over 10 times greater than those companies with no women at this level. Companies with no women on their executive committees have a net profit margin of 1.5%, whereas those with more than 33% women at this level reached an impressive 15.2% net profit margin.

The UK economy and shareholders have missed out on an additional £47 billion in pre-tax profit. This is how much money could have been gained if the companies with no women on their executive committees this year had performed with the same net profit margin as companies with more than 33% female membership on their executive committees.

Going backwards on women leaders

At the time of writing, there are just 13 women CEOs of FTSE 350 companies. That’s a mere 5% of company leaders. On the 17 April 2020 there were more CEOs named Peter (six) than there were women (five).

Women CEOs are critical to driving gender diversity at senior levels. Companies in the FTSE 350 led by women have an average one in three people being women on their executive committees, which falls to an average of one in five for companies led by men.

Chief Financial Officer (CFO) is another important company role where women fail to get to the top. Women enter finance in large numbers, but few make it to CFO. This year just 16% of CFOs are women.

A broken springboard

Executive roles containing a profit and loss (P&L) responsibility are considered to be key for future CEOs, yet in the FTSE 350 90% of P&L roles on executive committees are held by men and only 10% by women.

A staggering 68% (over two-thirds) of FTSE 350 companies do not have a single female executive committee member in a P&L role, raising serious questions about the desire for positive change in so many businesses and the prospects for women seeking to make it to CEO.

The story for men could hardly be more different with just 1% of FTSE 350 companies having no men with P&L responsibility on their executive committees.

Worrying signs amid green shoots of progress

The Pipeline welcomes the 2.7% increase of female membership on executive committees in the FTSE 350. Women now make up 19.8% of total executive committee roles, compared to men who make up 80.2% of these roles.

We note most of this increase comes from the FTSE 250, as the increase of female membership on FTSE 100 executive committees has slowed to 1.4%.

This year, it’s heartening to see more women in functional roles, for example in HR, begin to break through in larger numbers to top jobs. We also observe that those companies which are already good at promoting women are doing even better.

Unfortunately, similar numbers of companies as last year remain all-male bastions, with 15% of FTSE 350 businesses refusing to have a single woman on their executive committee. As we’ve explained, we see no change to P&L roles or women succeeding to the top job of CEO.

This is another generation of female talent lost. At the current rate of growth, we will miss another generation of female talent before we have any hope of parity.

• Check out the full report at: https://www.execpipeline.com/wp-content/uploads/2020/07/The-Pipeline-Women-Count-2020-FINALVERSION.pdf