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24 Feb 2021 | 11:31

IA steps up calls on companies to boost board diversity

(Sharecast News) - The Investment Association is to flag up companies that are failing to meet ethnic and gender diversity targets for its boards, it announced on Wednesday. The IA said that its Institutional Voting Information Service will now issue 'amber-top' warnings to any FTSE 350 companies that do not disclose either the ethnic diversity of their board or a credible action plan to improve it.

According to recommendations made by the Parker Review, an independent review into the ethnic diversity of boards first carried out in 2017, companies should have at least one director from an ethnic minority background on their board by 2021.

Andrew Ninian, director for stewardship and corporate governance at the IA, said: "The UK's boardrooms need to reflect the diversity of modern-day Britain. With three-quarters of FTSE 100 companies failing to report the ethnic make-up of their boards in last year's AGM season, investors are calling on companies to take decisive action to meet the Parker Review targets."

Gender diversity will also be tackled, with companies whose board comprises 30% or less female directors receiving a 'red-top' warning. Previously the IA only issued a 'red-top' warning for companies with a 20% or less threshold.

The IA's announcement coincided with data showing that the number of women on FTSE boards had risen by 50% in the last five years, from 682 to 1,026, with 34% of FTSE 350 board positions now held by women.

A total of 16 boards still have just one woman on them, although that is an improvement on 2015's figure of 116.

The data forms part of the Hampton-Alexander Review's five-year summary, published on Wednesday. The review was launched to encourage more women into leadership and board roles, and recommended companies have at least 33% of board positions held by women by 2020.

Sir Philip Hampton, chair, said: "The progress has been strongest with non-executive positions on boards, but the coming years should see many more woman take up executive roles. That is what is need to sustain the changes made."

According to the five-year summary, 92% of women on boards are NEDs, but just 8% are executives. Women make up around 40% in aggregate of NEDs on FTSE 350 boards, and just 14% of executive directors in the FTSE 100.

Joe Fitzsimons, senior policy advisors at the Institute of Directors, said: "In recent years, there has been important progress in improving the gender balance of major company boards, but much remains to be done.

"While women's' representation in non-executive roles has improved, there has been much less progress in fostering diversity at the senior executive level. Diversity and inclusion remains a work in progress for many organisations."
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