Gender diversity of newly-listed UK companies lags far behind listed companies
• Only 25% of board seats held by women versus 36% for FTSE-100
• Missed opportunity for IPOs to shake up their boards
• But pressure now coming from investors to improve diversity
Women accounted for just 25% of board members of newly listed companies on the London Stock Exchange significantly below the 36% of board members of FTSE100 companies reveals a study by RPC, the international law firm.*
Similarly, the FTSE350 also saw greater gender diversity than newly listed companies, with 34% of FTSE350 boards being women.
The study suggests that companies are not taking full enough advantage of the opportunity that restructuring their board ahead of an IPO gives them to increase gender diversity on their boards.
Many companies in the 12-24 months leading up to a listing will get themselves “IPO ready”, including looking at making changes to their board composition to ensure diversity and strengthen their credentials to help attract potential investor.
Karen Hendy, Head of Corporate at RPC: “Institutional investors are increasingly likely ask questions over why boards lack diversity. Aside from the business benefits of diversity, investor pressure will increase as funds under ESG-focused management rise.”
“It is positive to see that there were companies that listed in the past two years that did outperform the FTSE100 in terms of boardroom gender diversity – hopefully these companies can act as good role models for others to follow suit.”
Last July, Goldman Sachs confirmed that they will not act on an IPO unless the company has at least one diverse board member. CEO David Solomon has said that their specific focus is on increasing the representation of women.**
Proxy voting advisory firms are also increasing their calls for businesses to consider more seriously the diversity of their executive management teams. For example, PIRC, Europe’s largest independent corporate governance and shareholder advisory consultancy, pushes FTSE350 companies to comply with the Davies review aim of 33% women on boards. IVIS, who use a traffic light system to provide voting advice, will continue to give a ‘red’, its highest warning level, to companies which with just one woman (or less) women on their board.
There were notable exceptions amongst recent IPOs of companies that did outperform their peers in terms of boardroom gender diversity:
- Octopus Renewables Infrastructure Trust, an investment trust, has 50% of its board positions held by women
- Trustpilot – 38% of board positions are held by women
There is concern, however, that while women may be advancing in non-executive roles, they are much further behind in terms of executive roles. Within the FTSE100 there are just six female CEOs.***
A wide range of academic and Government backed research has suggested that boardroom diversity helps improve the financial prospects of a company. For example, the Hampton-Alexander review has stressed how a gender diverse board can improve a company’s performance and positively impact the decision making process at businesses.****
Connor Cahalane, Partner at RPC, adds: “A company preparing for an IPO has an excellent opportunity to reconfigure its board of directors and send a strong message to potential investors, and the company's own customer base, about the values of the business.”
“Companies need to consider gender diversity when making board changes before going to market. A diverse leadership team has been shown to improve a business's performance.”
*Based on analysis of the 54 Main Market IPOs in the 24 months to March 31 2021 – each 12 month period saw an average of 25% women on boards
**CNBC Interview with David Solomon, January 23rd 2020
****Hampton-Alexander Review 2021