As a result of increased scrutiny and varying influences, what changes have occurred in Board composition? And how well prepared are today's Boards to navigate the road ahead?
In 1996, Dr Elisabeth Marx conducted a report looking at the demographic and composition of the Boards of the FTSE 100 companies, and her results were published in her report 'A View at the Top'. That research was replicated 21 years later, and she reported some interesting findings; major shifts in some areas and stagnation in others -
- The average Board size was 12 in 1996, and was 11 in 2017;
- There are now fewer Executive directors on Boards (illustrating a preference for NEDs) going from 49% of the Board in 1996 to 26% in 2017;
- Female directors are up from 4% to 28% of Boards. Examine more deeply and the figures show that this has been driven by increased appointments of female NEDs rather than female Executive directors;
- Oxbridge & Harvard educated Board members hold relatively steady, going from 33% in 1996 to 25% in 2017;
- Boards are significantly more white and more male than the British population;
- The average age of the UK Board director has increased from 56 to 58.5;
- The international experience of directors has increased from 24% to 57%;
- Chairs are more likely to be UK nationals;
- Diversity in terms of functionality has gone backwards with an increase in finance backgrounds amongst Board members from 38% to 49%;
- The "most admired Boards" in both 1996 and 2017 have more females, more Executive directors and are less heavy on finance backgrounds;
The comparisons thrown up by these reports raise some questions and thoughts which could be applied to your Board -
- What do NEDs bring to the Board? On average, NEDs are 7 years older than Executive directors, bringing longer experience. NEDs also have more international experience (59%) compared with Executives (49%).
- Do NEDs have a strong understanding of the Executive team?
- Does the evident restricted board level interaction for Executives dilute their understanding of the company's high level strategy?
- Could the backwards step in functionality potentially reduce the diversity of perspectives on UK Boards, causing a narrower finance-based view?
- What will the next 20 years bring? Given public expectations, will we see greater racial and ethnic diversity? Will Boards take a stronger view on addressing environmental issues?