By: Mary Fjelstad, Senior Research Analyst
Today not only marks the last day of Women’s History Month, but also the eve of Emma Walmsley’s first day at the helm of GlaxoSmithKline. While many have applauded the selection of the first woman to lead a top-tier UK pharmaceutical company, the addition of Ms. Walmsley increases the percentage of FTSE 100 companies led by women to a mere 7%. This seems an appropriate moment to report on the United Kingdom’s progress on women’s representation in top corporate roles.
The growth in the number of women leading the largest 100 companies listed on the London Stock Exchange is very recent, which partly explains why the number is still so low. Ms. Walmsley joins just six others in this elite group: three took charge in 2010, with the remaining four assuming their posts from 2014 to the present.
FTSE 100 companies with female CEOs
Source: FTSE Russell, data as of March 31, 2017.
FTSE 100 women CEOs are represented in just five of the 10 FTSE UK sectors. Three of the women run Consumer Services companies, while Consumer Goods, Industrials, Utilities and Healthcare claim one female CEO apiece. This leaves five UK sectors without a single female CEO leading a constituent company. Among the five are Oil & Gas and Technology, sectors where women CEOs are also underrepresented in our US indexes.
Britain has been noteworthy in its efforts to elevate women to leadership roles. In 2011, British governmental leaders and groups first set specific goals to increase female representation, focusing on companies in the FTSE 100 and the FTSE 350. Progress towards these goals was to be monitored and reported on annually. In 2011, Lord Davies, then UK government minister for trade, investment, small business and infrastructure, set the first target: companies in the FTSE 100 index were to achieve 25% representation of women on executive boards by 2015. The goal was achieved by 2015, and the percentage currently holds steady at 25%. A new objective was also set in 2015 for the FTSE 350, targeting 33% female representation on the boards of constituent companies by 2020.
Why would the British government take such an interest in boosting women’s representation in corporate leadership roles? How might the country and economy benefit? These questions are perhaps answered by recent research suggesting that as female business leadership roles increase, so, too, does overall paid female employment at all levels. This could in turn contribute to growth in GDP. McKinsey & Co. estimates that for Britain, sharp gains in female employment could add £150 billion by 2025 to UK GDP over current standard forecasts. Improved economic output is forecasted to impact all regions, deriving from increases in overall female employment, the number of hours women work and female employment in more productive sectors.
It’s important to note that the UK goals and targets—though set and reported on by the government—are voluntary. So what’s the incentive for companies to comply and work toward increasing female representation in boardrooms? Again, recent studies suggest that companies with greater female representation on corporate boards may perform better, although research in this area is ongoing. Studies have shown that for companies to reap benefits, more than one woman on a board is needed; indeed, a threshold of three has been suggested for real impact.
While these governmental initiatives have focused on female representation on executive boards, they’ve yet to set targets for the number of women CEOs. This might be due in part to very little research having been published to date on the potential benefits of female CEOs. The reason behind this lack of research highlights the larger inequality picture: robust research requires a certain sample size and time horizon, and we haven’t had that many female CEOs running companies over long enough periods to produce statistical estimates of their effect.
So as Emma Walmsley joins the ranks of FTSE 100 women CEOs, advocates for gender equality can only hope this is the beginning of a growing trend. Fingers crossed, in time we may have the numbers we need to gauge their significance.
See https://www.gov.uk/government/news/women-on-boards for full documentation of the 2011 initiative; see also “Improving the Gender Balance on British Boards: Women on Boards Davies Review Five Year Summary,” October 2015 at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/482059/BIS-15-585-women-on-boards-davies-review-5-year-summary-october-2015.pdf; as well as “FTSE Women Leaders: Improving gender balance in FTSE Leadership,” Hampton-Alexander Review, November 2016.
McKinsey & Co., “The Power of Parity: Advancing Women’s Equality in the United Kingdom, September 2016
See Torchia, M. et al., 2011, “Women Directors on Corporate Boards: From Tokenism to Critical Mass,” Journal of Business Ethics, 102:2, pp. 299-317; and, Konrad, A. M. et al., 2008, “Critical Mass: The Impact of Three or More Women on Corporate Boards,” Organizational Dynamics, 37:2, p. 145.
© 2017 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.
All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this communication should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.