Gender, Director Tenure and Experience

Board Level Gender Analysis

Gender diversity in the boardroom continues to be an area of focus for organisations, regulators and governance professionals. The recently published FTSE Women Leaders Review is an example of this.

When we decided to look into this ourselves at the turn of the year, we focused on the listed financial services companies as the majority of our clients are in this sector. Data was gathered on 131 companies which between them had appointed a total of 1,001 directors of which 422 were women (42.2%) and 579 were men (57.8%) . The headlines are:

Out of…

131 chairs, 19 were women (14.5%) and 112 were men (85.5%)
148 executive directors, 24 were women (16.2%) and 124 were men (83.8%)
69 CEOs, 5 were women (7.25%) and 64 were men (92.75%)
113 SIDs, 55 were women (48.7%) and 58 were men (51.3%).

Further to that…

19 (14.5%) companies had more female directors whereas 93 (71.0%) companies had more male directors. 19 (14.5%) companies had an equal split.

90 (68.7%) companies had no women as executive directors or as chair. 11 (8.4%) had no men as executive directors or as chair.

44 (33.6%) companies had no female executive directors, chair, or SID. Only 4 (3.1%) companies had no male executive directors, chair, or SID.

It’s interesting that whereas the split between women and men on boards is relatively close to 50:50, the women tend to be in NED roles. The Companies Act does not differentiate between executives and non-executives although in reality, the roles are very different. However, it is clear that the people running the companies captured in our analysis are mainly men. This suggests that some companies could be leaving themselves open to a charge of cynically appointing women to boards to meet diversity targets but only giving them a “lesser” role. We all acknowledge that NEDs do play an important role in corporate governance. However, it’s the executive directors, the men, who are running most of the companies we looked at.

Director Tenure and Experience

As decision making in organisations has such a wide and sometimes unintended impact on multiple stakeholder groups, we thought it would be interesting to look at the age and experience of directors working in the listed financial services companies. Many of our clients are operating in this sector and it remains heavily regulated. Data was gathered on 131 companies and 1,001 directors. The headlines are:

The overall average age of executive directors is 59 and non-executive is 60.
Tenure is 4 years for the executive an 3.9 years for the NEDs.
The lowest average age is 51
The lowest average tenure we found is 6 years.

In terms of age, we thought the “outliers” were interesting. The oldest director was 81 and there are plenty of other directors still on boards in their 70’s. However, these are all chairs or NEDs. The youngest is 33 and actually holds a NED role. Not surprisingly, the younger directors in this sector tend to be in the challenger banks. Of the executives, the youngest CEO and CFO are 38 and 35, respectively, and they tend to be appointed to larger boards where their lack of experience can be balanced against more senior peers and suggests a “blended” approach to director recruitment.

Tenure, of course, can be misleading on its own. A director may be a new appointment to a particular company but might have had, and continue to have, other appointments. Also, the actual age of the company itself is important – if a company is only a year old, it’s impossible to have been appointed for any longer than a year. Lastly, just because a director is new to a board does not automatically mean that they are inexperienced. It should go without saying that a bank, for example, would be highly unlikely to appoint any director who is not vastly experienced. Facts like these skew the raw data which is why some analysis is required.

Finally, boards tend to be larger in financial services. The average number of directors appointed is around 10, with the largest being 15.

Whereas expanding this analysis to other sectors or to the FTSE 350 as a whole would be worthwhile (if time consuming), it is interesting to see that directors tend to be older, more experienced and the boards themselves bigger in financial services. This no doubt reflects the higher degree of risk, responsibility and regulation. A directorship in a financial services company, particularly a bank, is not for the faint hearted after all.