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Nov 01, 2012

Racial and gender diversity on the rise on FTSE 100 boards

Ninety percent of boards have at least one woman and 45 percent have a visible minority member, according to ISS Corporate Services’ State of Play 2012 report

Racial and gender diversity on corporate boards has increased since 2011 and elections for directors are taking place more frequently, according to a study of FTSE 100 companies focused on corporate governance issues.

Around 90 percent of boards of FTSE 100 companies have at least one female member in 2012, compared with 83 percent last year, according to the UK State of Play 2012 study by ISS Corporate Services. In total, almost 14 percent of board seats in 2012 are occupied by women.

‘Looked at another way, there was a seven percentage-point increase in the number of boards with at least one female director,’ the study authors write. ‘Moreover, at the higher end, even greater gains are evidenced, with 34 percent of boards composed of one fifth or more of females, compared with 25 percent in 2011. Nearly 45 percent of FTSE 100 firms have at least 10 percent female representation, which is largely unchanged from the previous period, while overall 13.8 percent of board seats across the index are held by women.’

Racial diversity on boards has also increased in the past year, with 45 percent of all FTSE 100 boards having at least one member of a visible minority, up from 38 percent in 2011, the study shows. It notes that the percentage of Caucasian directors overall on FTSE 100 boards has fallen to 91.6 percent this year from 93 percent last year. About 2.3 percent of board members are of African descent and 2.4 percent are of Asian descent, the authors say.

‘This shift toward diversification is exemplified by the fact that, as of 2012, just one study company ‒ Xstrata ‒ has neither a female nor racial minority member sitting on the board,’ the study points out. ‘In 2011, seven FTSE 100 companies fit that profile.’

The study further reveals a rapid shift to more frequent elections from classified boards in 2010 with elections held every three years. In 2012, 95 percent of boards of companies on the FTSE 100 hold elections every year, an increase from 88 percent last year.

The percentage of companies adopting a clawback provision has also risen steadily over the past three years, to 54 percent this year from 38 percent last year and 25 percent in 2010, according to the report.

‘This increase was to be expected following the recent financial crisis and attendant pressure from shareholders and other stakeholders to stem pay borne of performance tied to fraud or other irregularities,’ the study concludes. ‘Disclosure on clawback provisions remains varied. In some cases, the policy suggests the repayment of cash bonuses; in others, it relates to the vesting of deferred shares that could be forfeited.’