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The proportion of first-time, female and minority ethnic candidates appointed as non-executive directors by the UK’s largest listed companies dropped sharply last year, according to new research.
Boards prioritised candidates with experience running publicly listed companies as they contended with destabilising events such as the Russia-Ukraine war and high inflation, according to headhunter Spencer Stuart, which carried out the research on the UK’s 150 biggest listed companies.
Thirty one per cent of newly appointed non-executives in the 12 months to April 30 were first-time directors, down from 44 per cent a year earlier.
Ethnic minority candidates accounted for 15 per cent of non-executive board appointments, the lowest proportion since 2020. The figure had jumped to 27 per cent last year as companies raced to meet an official target to have at least one ethnic minority board member.
Chris Gaunt, head of Spencer Stuart’s board practice, said there had been “a huge push” by companies to hit the government-commissioned Parker review’s target of appointing at least one minority ethnic director by the end of 2021 for the FTSE 100 and the end of 2024 for the FTSE 250.
“We’ve seen in the past few years, companies rightly focused on achieving that target. And then [by] last year, almost every company had achieved that target and therefore maybe the foot has been taken off the pedal,” he said.
The Parker review target had been met by 96 per cent of the FTSE 100 and 67 per cent of the FTSE 250 by the end of 2022.
The proportion of non-executive vacancies filled by women fell to 51 per cent from 60 per cent a year earlier, according to Spencer Stuart’s UK board index due to be published today.
Women now hold 40 per cent of all board roles at the 150 largest listed companies, a slight increase from a year earlier, while minority ethnic directors hold 13 per cent of positions, up from 12 per cent last year. The census in 2021 recorded that 81.7 per cent of the population of England and Wales was white.
Targets to increase female and ethnic minority representation on boards “have worked to the extent that they have gotten the PLC community serious about achieving them”, said Gaunt. But there was a question as to whether some companies were yet moving beyond treating board diversity merely as “a compliance exercise”, he added.
Of 20 chief executive appointments in the 12 months to April, only three went to women along with four out of 22 chair roles.
However, Spencer Stuart said there had been an increase in women becoming senior independent directors, a role that is often “a good stepping stone” to being appointed as a chair.
“We’re slightly comforted, but not complacent about the fact that now so many new SIDs are women,” said Gaunt.
The research also highlighted the shortening tenures of chief executives in the UK. Chief executives in the UK’s largest listed companies now stay in post for an average of 5.1 years, down 12 per cent over the past two years.
Gaunt said the intensity of chief executive roles, coupled with competition PLCs face from private companies to recruit directors, had contributed to shortening tenures.
Shortening tenures could be “symptomatic of a broader societal challenge of not giving leaders enough time to see whether or not their decisions have had a real impact”, Gaunt said.
Chief executives were less likely than before to take on non-executive roles at other companies, the research found.
Gaunt said this was not a surprise because the past three years had been “a stark reminder that . . . unforeseeable outside crises that can emerge — whether it’s Covid, or Ukraine or an extreme inflation, or now Israel — that can quickly take up an inordinate amount of CEOs’ bandwidth and energy”.
