020 7636 9002 A A A

Women Count 2020

Foreword

Companies with women in senior leadership roles are more profitable. They are better innovators. They are more respected in their fields. Yet, as this report lays out, across the 350 biggest British PLCs, fewer than two in ten Chief Financial Officers are women, only 4% of investment managers are women, and just 5% of firms are led by a female CEO. In the FTSE 100, there are more CEOs called Peter than there are women in the top job. Depressingly, that is one fewer female CEO than last year.

Whenever data reveals a disparity of outcome between groups, the challenge to those in power should be – explain it or change it. There can be no good explanation for the massive underrepresentation of women at the top of British business – so it must change.

To succeed in getting more women into senior leadership roles, you need to have a healthy pipeline of female talent running right through an organisation. That means identifying and removing barriers at every stage which prevent women from making progress in their careers.

That needs buy-in from the top. Every single male CEO who looks around his boardroom table to see nine out of ten 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.

Government has a crucial role to play too. It must create a regulatory environment which promotes good business. Mandating companies to publish their gender pay gap figures – as I did in 2017 – is just one of the things government can do to drive improvement.

Whether it be on female representation in the boardroom, action to address racism, inclusivity for LGBT+ people, or policies to promote environmental sustainability and tackle climate change – staff members, clients, and customers are demanding change.

A generation is entering the workforce which simply views with incredulity the absurdities of women being paid less than men for doing the same job, or 95% of bosses being male.

Very quickly, firms which find themselves on the wrong side of history on this and other social issues will discover that they cannot recruit the talent they need to succeed. This report should be a wake-up call to them.

Act now to change your businesses, to make the most of every talent, and to play your part in making our economy one which works for everyone.

theresa may

Rt Hon Theresa May MP
Former Prime Minister of the UK

Lord Karan Bilimoria of Chelsea CBE DL, President, CBI

Foreword

Covid-19 is disrupting everything. The economic and social impact of the pandemic is severe and demands us to think about building back better in a way that long-standing questions of equity, justice and sustainability are addressed. UK companies are responding to the ‘new normal’ by innovating and adapting and there is a great opportunity for them to do more.

The final shape of our future remains uncertain, but it is abundantly clear that some things do need to change, and fast. As Women Count 2020 reveals, one area requiring urgent attention is gender diversity at the top levels of British business. For many years, successive governments have sought to drive increases in female representation through reviews and targets, and it is good to see progress being made amongst non-executives on company main boards. However, slow progress is still the norm on the executive side of many UK businesses. This report shows how the failure to develop and promote women into CEO or C-Suite roles has serious consequences, not least for profitability, especially for those companies who have yet to place a single woman onto their executive committee. We must do better than this.

When I arrived in Britain as a 19-year-old student there was a glass ceiling stopping people like me, who came from overseas, from getting to the top. Thankfully, I and a small number of others were able to break through and, over the last three decades, we have begun to become a country of aspiration and opportunity. But despite this progress there is still much to do for many women of talent in our businesses.

Dealing with the legacy of Covid-19 will require us to create and sustain an economy that works for and recognises the value of everyone, where we achieve a better Britain by all working together. To see the scale of the challenge ahead and the urgent need to change, I recommend this report as essential reading.

Karan Bilimoria

Lord Karan Bilimoria of Chelsea CBE, DL
President, CBI

Letter from the Authors …

Dear Reader,

Before we start on the data, we’d like to thank the Rt Hon Theresa May MP and Lord Bilimoria for writing their personal forewords to Women Count 2020, and for all they’ve done to support the economic case for greater diversity and inclusion. As Prime Minister and Government Minister, Theresa May has been exceptional at introducing measures to reduce discrimination at work, including the legal requirement for all firms with more than 250 employees to report their gender pay gaps. We know too that Lord Bilimoria will use his year as President of the CBI to advocate for the inclusion of all, as we navigate this perilous period ahead for our economy.

Women Count 2020 is the fifth in our series of annual tracking reports on the number of women on executive committees and main boards in FTSE 350 companies, as it stands at 17th April 2020. Using independent research, the data shows how little progress has been made over the last five years and proves conclusively how, more than ever, companies with diverse leaderships perform better and have higher profit margins, indicating that they are making better commercial decisions than companies without diverse leadership. Women Count 2020 reveals that 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 5 months.

As businesses grapple with the severe economic challenges caused by Covid-19, it is essential that every company leaves no stone unturned in the fight for survival and the search for maximum returns. However, it seems that for many businesses, the calls for action over decades from government, external organisations and female leaders and executives, have been ignored. Which is why the financial year closed with more FTSE 100 CEOs named ‘Peter’ than women in these roles. In any age, let alone in the third decade of the 21st century, and during a Covid-19 economic crisis, this position is scandalous.

The British economy and shareholders have missed out on £47 billion of pre-tax profit

Women Count 2020 provides compelling evidence as to why it is in companies financial self-interest to improve gender diversity at executive committee level. And quite frankly in the interest of governments and society.

This census should be a huge wake-up call for corporate Britain, especially as emerging evidence is showing that organisations and governments headed by women are faring better during the Covid-19 crisis. In business, we see noteworthy examples in the world of Hedge Funds, with female-led organisations outperforming their male-led competitors.

Some nations are showing that they understand the need to remove barriers to women occupying positions of leadership. In Germany, there are longstanding quotas for numbers of women in nonexecutive roles on company boards, and government ministers are indicating they are now prepared to go further, with legislation being proposed to extend a similar requirement to executive committee positions. British business should take note. Covid-19 is testing most companies to the limit, but it truly exposes those which lack resilience. Women Count 2020 shows that businesses which make the most of all the talent at their disposal, both female and male, without discrimination, will be best placed to win in the post Covid-19 world.

Yours,

Margaret McDonagh
& Lorna Fitzsimons

Co-Founders, The Pipeline

Executive Summary & Key Themes

Key Theme 1: Lost profits

  • FTSE 350 companies which 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.

Key Theme 2: Going backwards on women leaders

  • In 2020, there are just 13 women CEOs of FTSE 350 companies. That’s a mere 5% of company leaders. On the 17th April 2020 there were more CEOs named Peter (6) than there were women.
  • Women CEOs are critical to driving gender diversity at senior levels. Companies in the FTSE 350 led by women have an average 1 in 3 people being women on their executive committees, which falls to an average of 1 in 5 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, with men taking 84% of these roles.

Key Theme 3: Preparing women for the next level – a broken springboard

  • Executive roles containing a profit and loss (P&L) responsibility6 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% of these roles are held 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.

Key Theme 4: Worrying signs amid the green shoots of progress

  • We welcome 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, HR roles, 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.

The Count

Women Count 2020 is the fifth annual study of women executives, their roles on executive committees, and the impact on business performance in FTSE 350 companies, as it stands at 17th April 2020. This report reveals, in stark detail, how the failure to advance women to leading corporate positions has become a significant drain on profitability. Instead of seeing increases in the numbers of female leaders, this year there are fewer women CEO’s who are taking the reins of FTSE 100 businesses. There are also worrying trends for the next tranche of female leaders. Profit and loss (P&L) roles within organisations are key for those seeking the very top jobs, especially CEO.

We are seeing some progress in total numbers of women on executive committees. However, a deeper dive into this data shows that the 2.7% increase of women on executive committees since last year comes from only a small number of companies, which were already doing well. The increase also mainly sees women going into functional roles, not those all-important P&L roles. It’s clear: the UK remains in the slow lane on gender diversity at the top of its biggest companies, and until it takes effective action, we will all pay a heavy price.

There are four key themes in this report:

  1. Lost profits
  2. Going backwards on women leaders
  3. Preparing women for the next level – a broken springboard
  4. Worrying signs amid the green shoots of progress

1. Lost profits

FTSE 350 companies are missing out on sizeable profits through a failure to appoint more women to key executive roles. Reading this section, you will realise that the net profit margin peaks at 15.2% when there is over a third (33%) women on executive committees, and starts to tail off, to a respectable 12.5%, when we have 50% or more women on executive committees (see figure 1). Readers should note that there are only five companies with 50% or more women on executive committees, so it makes a negligible difference when these companies are subsumed in the >33% band.

The profit margin for companies with no women on their executive committee is a paltry 1.5%, for those with 1-25% it is 6.9%, and for those with 26-49% it is 10.6%. For companies with 50% or more women on their executive committee the net profit margin climbs impressively to 12.5% (see figure 2).

The last year has not been a good one for those FTSE 350 companies still without a single woman on their executive committee. In 2019, the net profit margins achieved by these businesses stood at 6.1%, but in 2020 this has collapsed to just 1.5%. The failure to look beyond outdated employment and promotion practices is resulting directly in poorer business performance. The gap between the net profit margin for companies without any women on their executive committees and those which do embrace a level of gender diversity in senior positions is the biggest we have seen in the five years of this research (see figure 3). The difference of 9.1% net profit margin between companies with no women and those with 25% or more women on their executive committee is extremely significant.

Net profit margin by % of Women on Executive Committee (banded) - FTSE 350 - 2020
Figure 1
Net profit margin by proportion of women on Executive Committee (banded) - FTSE 350 - 2020
Figure 2

Although there has been a general reduction in profit margins across all groups of companies, the level of reduction for those without any women on their executive committee is quite staggering. Last year in 2019, the difference in net profit margin between companies with no women and companies with women was around double (x2). However, this year the difference is approximately five-fold (x5.5), and the difference in net profit margin between companies with no women on executive committee and companies with 25% or more women is 7-fold (x7.1).

Companies which had no women on their executive committees in 2019, and now have female membership of 1-24% at this level, achieved, on average, an increased profit margin of 1%. In stark contrast, companies which had no women on their executive committees in 2019, and still don’t have any women here in 2020, on average saw a 5% decrease in profit margin. This is a 6% difference – a really positive outcome for those companies making efforts on gender diversity.

The differences in net profit margin are even clearer when we categorise companies by those with no women on their executive committee, those with 1-33%, and those with over 33% (it is worth noting that there are no companies with over 63% female membership of their executive committee). There is a 13.7% gap between companies with no women on their executive committee and those with over 33% (see figure 4).

The sums being lost in unrealised pre-tax profits for FTSE 350 companies are huge. If the 33 companies with no women on their executive committees performed with the same net profit margin as companies with over 33% female membership at this level, this would be an astonishing additional £47 billion in pre-tax profit for the UK economy and shareholders. If the 195 companies with 33% or less women on their executive committees performed with the same net profit margin as companies with over 33% at this level, this would be a staggering additional £195 billion in pre-tax profit for the UK economy and shareholders, equivalent to an average extra £1 billion in pre-tax profit for each company. These are huge sums of money to miss out on.

Net profit margin by proportion of women on Executive Committee - FTSE 350 - 2017-2020
Figure 3

The failure to maximise company profits by recognising the positive influence of women on executive committees is a scandal that hurts our national wealth and limits financial returns to hardpressed investors, most notably pension funds, so it’s a double whammy. The case for change here is unarguable, yet it seems many companies are ignorant, wilfully, or otherwise, of the opportunities on offer for improved company performance.

The Pipeline has worked with numerous large organisations who do want a better future. We help them to better understand how their cultures and practices affect progress on achieving sustainable diversity. Using our own quantitative analytic tool, GENIE™, we have accumulated thousands of responses from people working in widely different areas of business. Almost 65% of total respondents say that their manager has never spoken to them about how a good mix of men and women in leadership roles is good for business. This lack of appreciation of the benefits of gender diversity to company success goes a long way to explaining the prevailing culture in some businesses.

Net profit margin by proportion of women on Executive Committee (banded) – FTSE 350 - 2020
Figure 4
Proportion of CEOs in the FTSE 350 by Gender
Figure 5

2. Going backwards on women leaders

There remains a woeful lack of women Chief Executive Officers (CEOs) in the FTSE 350. Last year, Women Count 2019 revealed how there were only 13 female CEOs in the FTSE 350, and it was hoped that things would improve from this very low base. However, the situation remains abysmal, with 13 women still leading FTSE 350 companies (at the time of data collection). This represents a mere 5% of FTSE 350 company leaders (see figure 5).

In the FTSE 100, the situation has worsened. In 2020 (at the date of data collection – 17th April 2020) there are currently 5 female CEOs in the FTSE 100. It is hard to believe that things could get worse than 2019, when there were just 6 female CEOs in the FTSE 100, but 2020 sees another backward step. If maintained, this rate of regression will result in there being no women CEOs in the FTSE 100 by 2025. A depressing thought.

The lack of women company leaders is extremely worrying. Women Count 2020 shows, in line with previous studies, that female CEOs are much more likely to prioritise gender diversity at executive committee level than their male counterparts (see figure 6). The average percentage of women on executive committees led by female CEOs is 32%, outperforming male led businesses which sit on average at just 19% women executives. To illustrate the appalling failure of our nation’s major businesses to diversify their top positions, it is worth considering this: in 2020 Britain there are more CEOs in the FTSE 100 called Peter (6) than there are female CEOs (5). Despite repeated government initiatives, targets, and reviews, it seems that having a particular male first name gives you a better chance of becoming a CEO than being a woman. Perhaps women executives should change their name to Peter! There is also huge female underrepresentation in the position of Chief Financial Officer (CFO), a critical role that significantly influences company performance and one that usually sits on company main boards. Women Count 2020 shows that in the FTSE 350, 84% of CFOs are men, and just 16% are women.

female executives split by CEO gender
Figure 6

When looking further at leadership positions there is some damning data within specific groups of companies, which reveals a dire situation. Investment trusts are significant drivers of economic activity but do not have a traditional executive committee structure. In these organisations the role of Investment Adviser or Investment Manager is central to the strategic decisions and daily activity, so the fact that in FTSE 350 investment trusts, 96% of investment managers/advisers are men with just 4% being women should concern all (see figure 7).

The failure of companies to move away from male dominated leadership positions is felt keenly by women. The Pipeline’s extensive data, gathered through GENIE™, shows that when asked whether they can see people who have the same background as them at the top of their organisation, we tend to see around 75% of black colleagues disagree, and 50% of women disagree. This is in comparison to around 36% of men and 37% of white colleagues who disagree.

Investment Managers by Gender – FTSE 350
Figure 7

Figure 8

3. Preparing women for the next level – a broken springboard

The type of role undertaken by women who have become members of FTSE 350 executive committees really matters. There is a hierarchy of positions on executive committees and those jobs holding a profit and loss (P&L) responsibility are more highly valued. These are seen as essential roles for people looking to make the final step to Chief Executive Officer, often referred to as springboard positions and, in 2020, the evidence shows that women are just not getting the same opportunities here as their male contemporaries.

Women Count 2020 shows that women hold just 10% of P&L roles that sit on FTSE 350 executive committees (see figure 8), an extremely concerning level of representation for future prospects of arresting the decline in numbers of female CEOs in the FTSE 100, let alone beginning to make advances on improving gender diversity at the most senior corporate level.

The comparison with the number of male executive committee members in P&L roles is instructive. Women in P&L roles constitute 6.9% of total executive committee members in the FTSE 350, whereas men with P&L roles make up 60.3% of these positions. The situation is even worse when we dive further into the data and see that 68% of FTSE 350 companies do not have a single woman executive member in a P&L role (see figure 9). The figure is even worse for companies in the FTSE 250 (76%), showing many smaller companies outside the FTSE 100 are giving zero opportunities for women to obtain key P&L executive roles and, therefore, creating conditions where it is highly unlikely they will see a woman CEO in their business any time soon.

no women executives in P&L roles
Figure 9
women executives in P&L roles
Figure 10

The situation for women here is grim. 92% of FTSE 350 companies have less than 33% women in P&L roles (see figure 10). Again, the comparison with male colleagues is startling, with only 1% of companies having zero men in a P&L role on their executive committee.

The importance of women occupying P&L roles is evident in GENIE™ data, with over half of all respondents across numerous organisations agreeing that you can’t get to the top without significant budgetary responsibility.

The lack of women executive committee members holding P&L roles is also a big problem for wider corporate governance within FTSE 350 companies. Performing functional roles without P&L responsibility means that it is unlikely that such female executives will be sitting on company main boards. The consequence is many non-executive directors will not have sight of female talent within their organisation, limiting the opportunities for positive change on gender diversity when the time comes for decisions on executive succession planning and new leadership.

Women and men on Executive Committees - FTSE 350Figure 11
Women and men on Executive Committees - FTSE 100Figure 12

4. Worrying signs amid the green shoots of progress

Women Count 2020 shows that in the last year there has been progress in getting more women onto FTSE 350 executive committees. Women account for 19.8% of executive committee members this year, an increase of 2.7% since last year (see figure 11). This is an encouraging rate of growth compared to previous years but is still way below what is required to achieve gender parity on these critically important committees. If this year’s rate of growth were to be maintained, it would be 2032 until there was a 50-50 split between women and men for FTSE 350 companies.

Looking further, we see a slower rate of progress in this area from the bigger companies listed in the FTSE 100, where the situation is almost flatlining (see figure 12). For these companies the rate of increase in women on executive committees in the last year is just 1.4%, and at this rate of progress it will be another 20 years before there is parity between men and women on the executive committees of the FTSE 100. The data is also clear on where things are improving and failing; increases in the numbers of women on executive committees is largely being driven by companies which had previously made steps, however small, to improve their gender diversity at this level. Companies with 25-49% are up 6% since last year, and companies with 50% or more women on their executive committee are up 1%. The story for companies at the other end of achievement in this area is markedly different, with those which had no women on their executive committee being down 5%, and companies with 1-24% women falling by 2% (see figure 13).

To begin achieving a step change in behaviour and results on gender diversity at executive level, rather than the minor advances seen here, there needs to be action across the FTSE 350. The data suggests that, this year, the increase of women on executive committees is due to companies which already have women at this level further increasing the proportion of female executives. Instead, we need to see increases in female executives across the whole of the FTSE 350.

worrying signs
Figure 13

If we consider the same data but categorised in thirds, we see there is not a single FTSE 350 company with over two-thirds of women on their executive committee. Under this categorisation, 14.8% of companies have no women on their executive committee, 72.6% have between 1-33%, and just 12.6% have over 33% (see figure 14).

There are also concerns that women on executive committees are being appointed to functional roles, where prospects for future advancement to CEO level are extremely limited. As detailed above (pages 10-12), just 10% of executive committee members holding roles with P&L responsibility are women, a level that needs to increase rapidly if improvements in overall female executive committee numbers are to transfer into meaningful, long-term change in gender diversity and better business outcomes. The headline figures for company main boards also appear to offer encouraging signs of progress. There has been an increase of women executive committee members sitting on main boards from 9.4% in 2019 to 13.1% in 2020, and this is welcome news (see figure 15). However, there are still a huge number of FTSE 350 companies who do not have a woman executive on their main board (74%) and a further 21% only have one woman here. There is still much to do.

women on Executive Committees
Figure 14
Female executive directors
Figure 15

Conclusion

We are nowhere near the end of the crisis caused by Covid-19, but we are at the end of the beginning. It is already clear that things will not, cannot, should not, return to business as usual. The question everyone should ask themselves is: what have I learned from this experience? What do I need to do differently to make us better? What will the new normal look like? Therefore, as we get things moving again, it is imperative that we all show we understand the need to change. And one of the crucial arenas for change is in the leadership of our companies.

Women Count 2020 shows the consequences of inertia. Quite simply, if the companies with no women on their executive committees this year had performed with the same net profit margin as companies with over 33% women at this level, this would mean an additional £47 billion in pre-tax profit for the UK economy and shareholders. The failure to embrace gender diversity has created the conditions where there may not be a single woman CEO of a FTSE 100 company in just five years’ time. Keeping women away from critically important positions with profit and loss responsibility chokes off the development of future women leaders.

The cost of these failures is bad enough when times are good. In the tough times of the foreseeable future, adopting the same outdated attitudes and wasteful practices will simply not do. Britain needs its biggest businesses to show they understand the problem and lead a national renaissance that harnesses the best of everyone, regardless of gender. Then we will emerge from this crisis together, stronger, and more united than ever.

There is no time to lose. Come on British business, the people of your country need you.