A FTSE250 Group Company Secretary writes...
Earlier this year, the Institutional Voting Information Service (IVIS) issued a release announcing that from February 2019 in the current AGM season they would ‘Red Top’ companies on the FTSE 350 index which have no women, or only one woman, on their Boards. (IVIS will also Amber Top FTSE 350 companies where there is more than one woman on the board, but where less than 25% of the board is female.)
This hardly gives any time to ‘make amends’. Our Board comprises one female and 5 males (17%) – and we have been caught by this intransigent reaction. Do any other companies have this problem? If so how are you proposing to deal with it?
I would add that if you receive a red top then IVIS give you an opportunity to review their report. If you have statements in the governance section of your annual report and these are not picked out in the description by IVIS, you can propose factual amends to their summary in which you could include references that will either justify the Board’s position or highlight the strategy that the Board is taking to improve the ratio of women on the Board. This may help. I agree that consultation with your shareholders will also help if you feel this to be an area of concern.
I think it is fair enough for IVIS to highlight the position, as the targets have been around for a good while. Shareholders will react as they see fit, presumably influenced to a degree by the explanations and disclosures provided by the relevant companies (at least initially).
As a company in a similar position, we responded to the initial letter and will continue with our succession strategy as planned and communicated to shareholders. We will not take any action specifically in response to the red top but the board composition will evolve over time.
Feel as though your board may be off the pace. The subject has been around for several years. But if you haven’t had any churn then this might explain your position. We have a board of 7. Two EDs, both male, and five NEDs including the Chair. Three of the NEDs are female. We have had this NED ratio for about 5 years. Might be an idea to declare an objective in your Governance Report and speak with major shareholders.
FTSE 350 companies are subject to the Hampton-Alexander targets. Whilst these are recommendations and not mandatory, non-compliers can expect some adverse PR. The recent stance by IVIS adds a little more adverse PR and companies may accordingly wish to revisit their strategy for compliance with these targets . In this context to a large extent “it is what it is”.
The other point is that within the IVIS report there are separate assessments on three elements being the Proxy report (covering the AGM Resolutions), Corporate Governance and ESG. My understanding is they IVIS will only red-top the Corporate Governance element for this issue which is perhaps not so bad and could certainly be worse.
I find your comment that “This hardly gives any time to ‘make amends’. Our Board comprises one female and 5 males (17%) – and we have been caught by this intransigent reaction.” surprising given that this has been such a key focus in Board governance for a number of years with (I think) plenty of time for companies to think through Board succession planning to address.
If your shareholders have been happy for you to take no action in this regard to date you will need to continue to ensure this remains the case and they do not follow the red top recommendation through plenty of consultation and discussion with them.