As businesses grapple with the severe economic challenges caused by COVID-19, the Women Count 2020 report reveals that the UK economy is missing out on £47bn ($60bn) in additional pre-tax profits due to a lack of women in top executive roles.
The report, funded by the Pipeline — the UK’s largest gender diversity business — showed that FTSE 350 firms with diverse leaderships performed considerably better and had higher profit margins.
There was a positive correlation between having more women in leadership and profit margins. Firms with no women on their executive committees had a net profit margin of 1.5%, whereas those with more than 33% women at this level reached a 15.2% net profit margin.
It also revealed that on 17 April 2020 there were only 13 women (5% of firm leaders) at chief executive officer (CEO) level in FTSE 350 companies, in fact there were more CEO’s named Peter (6%) than there were women.
Over two-thirds (68%) of FTSE 350 companies do not have a single female executive committee member in executive roles containing a profit and loss (P&L).
UK’s economy shrank by a record 20.4% in April as a result of the lockdown. With full recovery looking unlikely until 2023, Britain could be on course for the worst recession in more than three centuries.
The research suggests companies need to act swiftly and address gender diversity issues in order to increase their profit margins to survive. It also shows that a further £47bn in pre-tax profits could help keep the NHS running for a full five months.
Former PM, Theresa May, said: “Whenever data reveals a disparity of outcome between groups, the challenge to those in power should be – explain it or change it.”
Speaking on the underrepresentation, May said “there can be no good explanation for the massive underrepresentation of women at the top of British business – so it must change.”
May urged male CEO’s to take action if “nine out of ten people in the boardroom are men”, in order to help make businesses more accessible for their “daughters or granddaughters.”
“Act now to change your businesses, to make the most of every talent, and to play your part in making our economy one which works for everyone,” May added.
Female membership on executive committees from April 2019 to April 2020 in the FTSE 350 is up to 19.8%, an increase of 2.7% year-on-year, with companies that have been promoting women faring better.
But worryingly the research revealed that the increase at companies with more female leadership was driven by other women in functional roles such as HR, marketing or accounting.
This year, in finance only 16% of chief financial officers (CFO’s) are women, with men taking up 84% of the roles.
Executive P&L roles are considered to be key for future CEO’s, yet in the FTSE 350, only 10% of all P&L roles on executive committees were held by women and 90% were held by men.
Only 11% of executive committee members in the construction industry are women, this is a year-on-year drop of 2% - this is the lowest proportion of women on executive committees out of all industries.
According to the data, only 7% of executive committee members (down 4% since 2019) on main plc construction industry boards are women - out of a total of 56 executive on board, only 4 are female.
The retail sector is not far behind with only 24% of women on executive committees (down from 17% in 2019) with just 12% of female executives on main plc boards. Worse yet, only 12% of P&L roles on executive committees are held by women, with zero female CEO’s or board chairs.
For the 288 companies (82.5%) which reported their executive committees this year, the report focusses on all executive roles containing a P&L responsibility. The findings of the Women Count 2020 report are in line with research conducted by the IMF and McKinsey.
Lord Karan Bilimoria of Chelsea CBE, DL, President CBI, said: “The failure to develop and promote women into CEO or C-Suite roles has serious consequences, not least for profitability, especially for those companies who have yet to place a single woman onto their executive committee.
“We must do better than this. Dealing with the legacy of Covid-19 will require us to create and sustain an economy that works for and recognises the value of everyone, where we achieve a better Britain by all working together.”