UK boardrooms are making clear progress on diversity and the use of external evaluation, according to the Association of British Insurers (ABI).
In a new study based on an analysis of FTSE 350 annual reports, the ABI found that:
Board diversity is improving: 26% of FTSE 100 and 31% of FTSE 250 board appointments were women in the year to 30th November 2012, compared to 19% and 12% respectively a year earlier.
On succession planning, 80% of FTSE 100 and 50% of FTSE 250 chief executive officers appointed in the year to September 2012 were internal appointments.
Based on a survey of FTSE 350 company secretaries, the use of external evaluation of board effectiveness is increasing: 44% of FTSE 100 and 30% of FTSE 250 companies conducted external evaluation, up from 31% and 17% respectively in the previous year.
The ABI has also published recommendations to improve shareholder engagement on various issues as follows:
Companies should disclose steps they are taking to promote boardroom diversity.
Companies need to show more meaningful disclosures on their approach to succession planning.
External board evaluations should be carried out by an independent party with no conflict of interest.
The ABI’s director general, Otto Thoresen, comments: “In a year dominated by a focus on executive pay, it is important to remember that companies do not fail because their pay structure is wrong, but because of ineffective boards and failures of strategy development and execution.”