British firms that have fewer than two women on their board are to be branded with a ‘red top’ warning by investors, in a bid to encourage more diversity at the top of the country’s biggest companies.
The naming-and-shaming move from the Investment Association (The IA), an organisation which represents the owners of £7.7 trillion of assets, will apply to all FTSE 350 non-executives.
Furthermore, companies with a less than 25% female board will receive an amber warning.
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The Daily Telegraph says “the “red top” is not an instruction for investors to vote down all-male boards, but is an alert for investors to take note of the lack of diversity and a warning to the board that it needs changes”.
“Evidence clearly shows that more diverse boardrooms make better decisions. Investors want to see greater diversity in the companies they invest in to ensure our savers and investors are getting the best returns possible,” said Andrew Ninian at The IA.
According to the annual Hampton-Alexander Review, just five companies in the FTSE 350 Index have no women at the top table, down from eight in 2017 and a whopping 152 in 2011, “a sign that government efforts to increase gender parity are paying off”, says Bloomberg.
It is a similar story in the US, where the majority of companies in the S&P 500 have at least one woman on their boards, but only about a quarter have more than two, according to a study from PwC.
Last October, California banned companies headquartered in the state from maintaining all-male boards.
“It's the first such law on the books in the United States, though similar measures are common in European countries” says CNN Money.
Yet for all the progress on boards in the UK, there remains a huge amount to be done to achieve gender parity across the workplace.
In 2018, “the number of female CEOs among the FTSE 100 remained at six for the third year in a row”, notes Bloomberg.
Meanwhile, BBC analysis released this week found four in 10 private companies that have published their latest gender pay gap are reporting wider gaps than they did last year.
“Shining a spotlight on pay discrepancies was meant to spur action. So the news that the gap is getting bigger in almost two out of five companies that have so far reported may bring dismay,” says BBC economics correspondent Dharshini David.
“But this highlights that there's no quick fix,” he says: “A large gap points to (typically) women being clustered in more junior roles [and] progressing them through the ranks could take years.”
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