The Hampton-Alexander Review and the balance of gender diversity

Monday 14, June 2021

In this article, The Chartered Governance Institute interviewed Nasdaq Governance Solutions on the Hampton-Alexander Review and the impact on gender imbalance on boards.

To what extent has the Hampton-Alexander Review driven for improvement of representation of women on boards?

In his introductory letter to the fifth and final Hampton-Alexander Review published last February, Sir Philip Hamilton said that ‘enormous progress had been made’ over the past decade on the number of women on FTSE 350 boards since the Davies Review in 2011.

Sir Philip reflected on the great strides made in improving gender balance on FTSE 350 boards over the last ten years, and it is undoubtedly true the last decade has witnessed much “levelling up” on gender representation. However, without detracting from this considerable achievement, nearly one-third of FTSE 100 companies failed to meet the 33% target set by the Hampton Alexander Review. That is a considerable number of companies, increasing to over 50% when looking at FTSE 250 companies.

What this shows is that although the Hampton-Alexander Review target of 33% of women on boards was reached in the aggregate, this can unwittingly mask a number of individual companies who are falling short, which is close to half of the FTSE 350. That is an uncomfortably large number despite the progress that has been made.

Perhaps the most important reason for expressing a cautionary note on the Hampton-Alexander Review is the small number of women who have been appointed as executive directors. If you drill down into the figures, you find that women directors of FTSE 100 companies hold only 14.2% of executive directorships. In addition the number of executive directorships held by women increased by only one since the last report, which resulted in only eight women CEOs overall.

The equivalent figures for the FTSE 250 tell the same story, with women holding just 11% of executive directorships, and only nine women being CEOs. More positively, there are no longer any FTSE 250 all-male boards, which is a significant milestone.

To what extent is it ‘job done’, and what do you think is the forward approach?

There is still some way to go when looking at the number of individual FTSE 350 companies who are still falling short, even if they are on the right path. It needs repeating that despite the headlines, nearly 50% of companies making up the FTSE 350 have not yet achieved the 33% target. Sir Philip remarked that companies nowadays should be striving for a ‘full’ 50-50 gender balance, which surely should be the yardstick. After all, the 2011 Census reported that females make up 51% of the population and no one is expecting that to change much.

The Hampton-Alexander Review is not only about women on boards, it is also about looking at women in leadership. It is here that the findings are more troubling. Perhaps this has been lost a little in the headline messaging, but it’s not always recognised that the 33% target set by the Hamilton Alexander Review five years ago applies equally to women in leadership positions. Leadership in this sense is measured by the percentage of women holding ‘functional roles’, such as finance directors, HR directors, chief information officers, company secretaries and/or general counsels.

So what does the latest Hampton-Alexander Review say about women in leadership? If you look at the FTSE 100, you will see that women took up only 26.5% of executive committee positions. Although the situation improves when looking at the number of women directly reporting to executive committee members (the percentage increasing to 31.2%) it’s still short of the 33% target.

If the number of women in leadership figures for FTSE 100 companies was disappointing, the equivalent figure for FTSE 250 companies provides no respite. For the FTSE 250, the percentages are 21.7% (women occupying executive committee positions) and 29.7% (women who are direct reports). Both are significantly below the 33% threshold. In fact, the number of FTSE 250 companies meeting or exceeding the 33% target is actually going down, with more companies failing to meet the target in 2020 than in 2019. However, the number of all-male executive committees of FTSE 350 companies is moving in the right direction, having fallen from 44 (in 2019) to 28 (in 2020), although some would argue this is still 28 all-males committees too many.

In this digital age and the growing importance of CIOs (chief information officers), it was disappointing to see that the percentage of women appointed to this vital position is actually falling. The figures published in the latest Hampton-Alexander Review showed the percentage of women appointed as CIO for FTSE 350 companies had dropped in the year from 13.5% to 11.3%.

The figures for women in leadership positions really do matter. Considerable corporate power is wielded by executive committees; it’s where strategies are inevitably determined and key decisions are often made. Women need to be fully engaged in these processes.

In summary, then, whilst the overall direction of gender balance is positive when measured over the past decade, especially the number of women now in boardrooms, much more work needs to be done when it comes to senior management positions. The number of women board executives on FTSE 350 companies is only 11%, and women make up less than a quarter of the executive committees. This surely has to change.

Norway introduced 40% women on boards (‘Golden skirt phenomenon’) now the same women are on multiple boards, so that is also an issue. What is the solution regarding quality and qualified to increase volume?

‘The Golden skirt phenomenon’ - what a phrase! It describes those women appointed to boards of Norwegian PLCs under mandatory Norwegian gender-balance legislation introduced in 2008. The law requires that at least 40% of men and women must be represented on the boards on PLCs.

Although the law unsurprisingly led to an increase in the percentage of women on PLC boards, subsequent research published in 2018[1]  by Professor Reidar Øystein Strøm of the Oslo Metropolitan University showed, perhaps counterintuitively, that the number of (individual) women on Norwegian PLC boards actually declined after the law was implemented. The benefits of the legislation were therefore concentrated among fewer women, not more.

What’s also interesting is that the gender balance legislation did result in Norwegian PLCs moving to full 50% equality. Instead, when companies reached the statutory 40% quota , the percentage of women stayed at this level; companies did not go beyond the quota.

The Norwegian study additionally looked at the number of average directorships held by men and women, and the connections created when directors sat on multiple PLC boards. The study appeared to show that whilst the Norwegian gender balance law had successfully broken the ‘old boys network’, it had been replaced with an ‘old girls network’.

Taken overall, the sobering conclusion of the study was that the two principal outcomes sought from the Norwegian quota legislation, namely gender equality and improved financial performance, had failed to materialise, and the corporate governance consequences were largely negative. (One example of the unintended consequence of the legislation was what the study described as the ‘mass exodus’ of Norwegian PLCs and the converse strong growth in privately owned limited companies that were exempted from the gender balance legislation.)

The unintended negative consequences that can arise from quota legislation is supported by research from the Cambridge Judge Business School. The conclusion of one study[2] was that the use of quotas doesn’t significantly help recruit women to board positions or senior executive roles. This study found that using ‘hard quotas ‘for improving women representation on boards can create a hostile board atmosphere for women, typified by an ‘us versus them’ environment that suppressed women’s social interaction within companies. The same study also found that quotas can create a perception that board appointments are not made on merit, even if the skills sets of women appointed as directors are comparable to their male colleagues. This can result in what the study described as women’s voices being muffled in the boardroom.

The study looked at over a thousand companies from 42 countries over a 10 year period. One finding was that Norway, which was highlighted because of its ground-breaking 40% quota for women on Norwegian listed company boards, was no higher than 9th when looking at female representation in senior executive roles (at 15%), with the vast majority of countries covered by the study not using a quota system. The study hypothesised that it is the perception that women have not been appointed on merit that may be behind the finding of lower senior executive representation of women in those countries with a female board quota.

 Despite the two studies cited being negative about the use of quotas, it’s unlikely that quotas will disappear from the scene completely. Legislation may still have a role to play if voluntary approaches are seen as ineffective or too slow.

What metrics would help to measure and feedback on for a direction of change

As has been said by others, it’s important not simply ‘to count the numbers’, but rather ‘to make the numbers count’. Reporting needs to be more focused, with greater emphasis, perhaps, on a management by objectives approach. Too often, company reporting parrots much of what was stated in previous years, particularly when reporting on operational processes which are unlikely to change substantively from year to year. If not careful, this type of reporting can unintentionally obscure any reported changes. Although there will be instances where for statutory or regulatory reasons companies have no choice other than to repeat the information annually, companies can still go that extra mile and make sure they highlight changes that occurred during the year.

Whilst the future will likely herald more reporting and greater transparency, it is important that legislators (and companies) remember that it’s very easy when looking at performance measurement and management systems to ‘hit the target but miss the point’. There may be a danger of either focusing too much on quantitative measures or attempting to quantify some dimensions of performance that are better expressed qualitatively.

This can potentially be a problem with the market continually pressing for more information and greater disclosure. This is fine, but not if used as a measure of performance that gives rise to unintended outcomes. To put it another way, it’s great ‘hitting targets’ but not if they are ‘missing the point’. What’s needed are focused and carefully thought through metrics that are measured over an appropriate time frame, which will often mean looking beyond a year.

For example, one significant peer-reviewed academic study[3], which looked at many companies spanning a 28 year period, strongly suggested that shareholder value is positively correlated with companies creating stakeholder or social value, but that the increase in shareholder value (in share price, cash flow and/or profits depending on the circumstances) typically took four or more years to be realised. (The study was subsequently corroborated independently by a further peer reviewed study showing there was a causal correlation between creating stakeholder value and shareholder value; went beyond mere correlation.) The point is that companies need to use metrics that measure performance over an appropriate timescale, which as this study showed can be four years or more. As businesses move further towards sustainable value creation and intangible assets, care will be needed, to make sure that the metrics used are suitable for measuring performance over a longer timescale.

What’s next for boardroom diversity?

Much will be about executing, or delivering, a diversity and inclusion strategy - it’s a long haul. It’s relatively easy for a company to appoint new (diverse) people to its board, the difficulty is in making sure these appointments are successful. Key to this is for directors with diverse views and perspectives being able to express themselves positively and be genuinely heard in the boardroom. First and foremost, this means creating an environment that’s psychologically safe. The FCA have cited creating psychological safety as being probably the single most important action companies can take to create a beneficial culture.  

It’s really important that diversity in boardrooms is reflected throughout the company. Sometimes performance metrics for diversity are limited to boardroom diversity. Whilst this is clearly important, for companies to benefit fully from diversity and inclusion, this should be implemented across the whole group; the policy or strategy needs to be company-wide.

Looking at other changes, it would not be surprising to see more reporting requirements, especially with respect to ethnic representation. This might be seen, for example, in more pay gap reporting legislation.

Finally, forward-thinking boards should now be taking steps to embrace cognitive diversity. This means looking seriously at how they can harness and promote different thinking in the boardroom. Much has been said and written about the benefits that cognitive diversity can bring to board discussions in decision making, but taking the action necessary to bring this about is another thing altogether. It will be interesting to see how many boards start to make those changes necessary to become a truly cognitively-diverse body. In the future, it’s likely that organisations will be hearing much more about how the effectiveness of leadership groups – not just boards – can be improved, and the significant role that an effective diversity and inclusion strategy can play in this.

[1] [1] The Norwegian gender balance law. A reform that filed? (January 2019) (



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