Gender Diversity and UK Corporate Financial Health: Stronger Credits Have More Female Board Members

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In 2011, FTSE350 boards were 91% male, and 150 of those companies had no female board members at all. In 2015, the Hampton-Alexander review set a 2020 target of 33% for average female representation – and this was achieved in May 2020.

Companies that embrace diversity are more likely to be progressive in multiple ways, but corporate diversity also exerts a subtle but powerful and direct influence on performance, because constraints in any form tend to be bad for business. A McKinsey & Company report found that the greater the representation of women executives at a company, the higher the likelihood of outperformance – with up to 48% separating the most from the least gender-diverse companies.

A gender-diverse leadership certainly seems to be linked to financial strength; consensus credit ratings are noticeably better in companies with more females on their board. Credit Benchmark currently cover 248 companies in the FTSE350 universe, and 80% of these companies meet the 33% target for women on their board.

Figures 1 shows the credit distributions of the 248 companies in the FTSE350 universe that meet / don’t meet the 33% target for women on boards.

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Figure 1: Credit Distribution of 248 companies in FTSE350 universe, Jan-2022

81% of companies who do meet the 33% target for women on boards have an IG credit rating in Jan-2022. This is 10 percentage points higher than companies who do not meet the 33% target.

In addition, 4% of companies that meet the target have a credit rating of aa; those that miss the target have no companies higher than the a category.

Figure 2 shows credit trends for the 248 companies in the FTSE350 companies that meet vs. don’t meet the 33% target for women on boards.

Figure 2: Credit Trends

Serco Group PLC and Hill & Smith Holdings PLC are examples of FTSE350 companies who meet the 33% target for women on their boards. Both companies have shown improvement in the past year and currently hold an IG credit rating. Both companies are currently not rated by either S&P or Fitch.

Figure 3: Serco Group PLC

Figure 4: Hill & Smith Holdings PLC

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    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.