Gender imbalance in businesses causing loss of billions of pounds

• Aparna Sreevalsan
• 13 October, 2022

 

• The Pipeline report reveals an alarming lack of progress toward gender equality in FTSE 350 corporations.
• The average pre-tax profit for each FTSE 350 business would increase to £900 million if there were more women in executive positions.
• Balanced Executive Committees throughout the whole FTSE 350 may increase UK GDP by 2.5 per cent.

 

LACK of gender diversity at FTSE 350 firms is costing the economy dearly, with billions of pounds and the equivalent of 2.5 per cent of UK GDP being lost, revealed The Pipeline*’s recent analysis report.

The seventh-annual Women Count 2022 study examines the function, importance, and proportion of female executive committee members in the top 350 corporations in Britain.

It discovered that the pre-tax profit that could be gained by companies with less than a third of women on their Executive Committees if they had over a third of women on their Executive Committees would mean an extra £58 bn dividend for the UK economy.

Analysis also claims if the companies with fewer than a quarter of their executive committees comprising women were to perform with the same profit margin as companies with more than a quarter of their executive committees comprising women, it would mean an additional £54 billion in income to the UK economy.

The figures are roughly the equivalent of the UK’s expenditure on schools in 2021/22, more than the defence budget, and triple what spend on the police.

Despite entry-level hiring frequently being close to 50:50, a startling 96 per cent of CEOs in the FTSE 350 are male, highlighting the enormous gender disparity in British corporations. As a result, more than half of the population’s skills and energy are being ignored by enterprises.

Executive committee members are typically made up of three-quarters males and one-fourth of women.

Males make up three out of every four executives who are making their way up to the position of CEO and who look to other men for leadership, direction, and advancement.

There are far fewer female role models and promotion prospects for women in leadership positions.

The report also found that:

• 74 per cent of executive committee members are men.
• 10 per cent of companies with executive committees have no women on them at all.
• Companies with female CEOs are over four times more likely to appoint women executive directors to their main board than companies with male CEOs. The proportion of female executives on the main board of a company with a female CEO is 63 per cent compared to 14 per cent where the CEO is male.
• The business-critical role of Chief Financial Officer (CFO) is far more likely to be filled by a man than a woman: in the FTSE 350, 82 per cent of CFOs are male.
• Women are still not being promoted to key profit and loss roles: in the FTSE 350, 84 per cent of P&L roles (Profits& Loss) are filled by men while nearly half of FTSE 350 companies have zero women in P&L positions.
• Most business main boards have no female executive directors on them at all. In the FTSE 350, nearly 70 per cent of companies have no female executive directors at all on their main boards

The authors of the report, Lorna Fitzsimons and Margaret McDonagh said: “Today’s senior business leaders face unprecedented headwinds of economic turmoil, disruption to supply chains, rising commodity prices, and labour shortages. No generation of CEOs has ever confronted such a range of challenges at the same time. And yet we, as an economy, are wilfully missing out on a source of profitability, talent and innovation which is readily available within the system.

“As we mourn the passing of The Queen, the longest-serving female leader in history, it is shocking to note that, in the 70 years of her reign, there has been so little change at the Executive level of our biggest companies.

“The tragedy is not just for individual women who are blocked from fulfilling their full potential. The real tragedy is that businesses are cutting themselves off from a pool of talent and innovation and forgoing an additional 2.5 per cent growth in GDP. It is now unarguable to state that businesses with diverse voices at the top, across gender, race, and class backgrounds, do better”.

Women Count 2022 examines the proportion of female executives in the FTSE 350. For the last seven years, it has monitored the gender diversity of British Executive Committees and determined that the pace of development toward equality is glacially slow.

 

*The Pipeline is a leading diversity business, working with organisations to develop all their talent to deliver better results.