Issue link: https://digital.shearman.com/i/1512772
Shearman & Sterling LLP 61 | U.K. Corporate Governance Developments FTSE Women Leaders Review In February 2023, the independent and government- supported FTSE Women Leaders Review body published its second report on the progress being made by listed companies in meeting a December 2025 target of FTSE 350 companies having at least 40% female representation on their boards. Reporting by reference to a combination of data with respect to all board positions as of October 2022 and January 2023, the Review was able to confirm that this target had been reached three years early. In addition, 64 FTSE 100 companies had at least one woman in one of the four-key roles of Chair, SID, CEO or CFO, and four companies had women holding three out of those four positions. However, while in 2022 48% of board appointments for FTSE 100 companies went to women, very few of those appointments were to the CEO role (women only held nine CEO roles among FTSE 100 companies, as opposed to 19 chair roles). For the first time, the Review published equivalent data for the U.K.'s 50 largest unlisted businesses (e.g., large private companies and professional services firms), showing women holding executive leadership positions at just below 35% but, on average, at only 32% with respect to board positions. Further good news for women's representation on boards in the U.K. was that the U.K. (using the FTSE 350 indices) ranked second (40.2%) behind France (44% with just 40 companies in the CAC index) but with a total of 1203 U.K. board positions held as opposed to 259 in France. At the bottom of the list for women's representation on boards were California (33.6%, based on 100 companies in the S&P index) and Germany (32.4% with 39 companies in the DAX index). 3 Ethnic Diversity On Boards In March 2023, the Parker Review on Ethnic Diversity on U.K. Boards also published a report on the progress being made to address the disparity between levels of ethnic diversity in the U.K. population at large and ethnic diversity on U.K. FTSE 350 boards. Aligning itself with the FTSE Women Leaders Review, it also announced that it would be expanding its reporting to include ethnic diversity in senior management in FTSE 350 companies and to the U.K.'s 50 largest private companies and businesses. The report showed that 96 of FTSE 100 boards had met the "at least one director from an ethnic minority background by 2021" target, with 27 boards having two and 22 boards having more than two such directors. Overall, 18% of board positions were held by ethnic minority individuals. That percentage fell to 11% among FTSE 250 boards, with just 60% of companies meeting the 2021 target (which for FTSE 250 companies has been set for 2024). However, while there is clearly much that still needs to be done to improve ethnic diversity on FTSE 250 boards, it is worth noting that these figures are somewhat skewed by the FTSE 250 index including around 85 companies that are investment trusts with very small boards and few employees. As with the FTSE Women Leaders Review report, this Ethnic Diversity report showed only a small number of key senior (including executive) positions on boards are held by ethnic minority individuals, though interestingly, the Women Leaders report showed only two more women FTSE 100 CEOs (nine) than there are FTSE 100 CEOs from an ethnic minority background. Over half of ethnic minority directors have an Asian background with the next highest ethnic background (Black) standing at 17% (for FTSE 100 companies). 4 AGMs—What We Have Seen So Far In 2023 Looking at the AGMs of FTSE 350 companies that have been held in the first half of this year, the following trends can be seen. Meeting Format—Physical, Hybrid Or Virtual During the pandemic there was a necessary switch to shareholder meetings held remotely. Because of technical U.K. company law constraints, these meetings generally needed to take a "hybrid" format, usually with two directors meeting physically together in one place and everyone else joining the meeting virtually, although a few companies have got themselves comfortable about holding a "virtual only" meeting. Now that we are out of the pandemic, most companies have reverted to holding physical meetings, with "remote" facilities sometimes attached to them, such as live webcasts of the proceedings or a dial- in facility. Around 70% of AGMs held in the first half of this year were held in a physical setting. The rest were largely held as hybrid meetings with just two as virtual meetings. This move has likely been driven by strong opposition from proxy advisers to "virtual only" meetings and the additional expense for companies in buying the technology required to run a hybrid meeting, particularly when there may not be much take up of the facility of attending a meeting virtually. 3 See Shearman & Sterling LLP, "Women Coming on Board in the UK," https://www.shearman.com/en/perspectives/passle/102i8zt/women- coming-on-board-in-the-uk (March 8, 2023). 4 See Shearman & Sterling LLP, "New Targets to Increase Ethnic Diversity on UK Boards, etc.," https://www.shearman.com/en/ perspectives/passle/102iaak/new-targets-to-increase-ethnic- diversity-on-uk-boards-etc (March 15, 2023).