Management Today looked at the boardroom make-up of 200 listed companies in 1970. Twenty five years on and now surveying 2,000 plcs, the results have altered but little. The typical director is still male, middle-aged, and Oxbridge educated.
'What do you want to be when you grow up?' If the answer is 'a captain of British industry' you had better get daddy to put you down for a top public school. From there a modicum of hard work should secure a place at Oxford or Cambridge which will stand you in good stead to fulfil your ambitions. One further point: girls, you may as well forget it. Your brother is 100 times more likely to sit on a top company's main board than you are.
Twenty five years ago Management Today looked at the boardroom anatomy of the top 200 listed companies. Unsurprisingly the then typical board reflected the above scenario, and was very much part of a clubby old boys' network. Women were so rare as to be virtually non-existent and a public school education followed by Oxbridge was the order of the day. However, what is surprising is that a quarter of a century down the line this still holds broadly true. Although it would be wrong to say that the upper reaches of British industry have remained static, the changes which have taken place have now been far outstripped by those in British business and society as a whole. The boardroom, particularly in terms of its individual members, remains a strangely anachronistic place, seemingly stuck somewhere in the mid-1970s.
To compile the 1995 profile, Management Today teamed up with Hemmington Scott, publisher of the Price Waterhouse Corporate Register. The vast database which this provided allowed the scope of the profile to be widened far beyond the 200 companies surveyed in 1970. Today's profile looks at the nearly 2,000 quoted companies (excluding investment trusts), providing a picture of the average UK plc. It also looks at the FTSE-100 companies, which are more directly comparable with those in the 1970s survey.
The picture that emerges in both cases is a conservative one. Today's boardroom director, particularly in the upper echelons, differs little from his – women are still very rare in the boardroom – 1970s counterpart. Across all quoted companies, the age of the average director is now 53 and he shares his board with just under six other directors, three and a half of whom are likely to be non-executives. The director is likely to have had a university education (70%) with a good chance of having attended either Oxford or Cambridge. If he has any professional qualification (37%), it is most likely to be in accountancy. This identikit picture of a successful, middle-aged, middle-class male is lent further support by the information on hobbies: over one-third of those who listed leisure pursuits cited golf first. Next on the list came tennis, followed by music and gardening.
The percentage of directors with professional qualifications has grown by a small but significant amount from 32% to 37%. This figure is prone to some ambiguity – it is difficult to define what exactly constitutes a professional qualification. One point that emerges clearly, however, is that accountancy is an excellent route to the top. Fifty per cent of those with qualifications – 19% of all directors – had some sort of accountancy qualification. Others fared less well. Business school qualifications, seen in countries such as the US as a prerequisite to a high-flying career, clearly have yet to gain currency over here: only 2% of directors claimed MBAs.
Salaries have more than kept pace with the times. In 1970 an average top 200 director earned £11,000 – equivalent to about £87,000 today. The improvement in directors' remuneration is marked. The average director of any quoted UK company now earns £104,000. For a more directly comparable average FTSE-100 directors' pay, this figure rises to £248,000 – which represents nearly a threefold increase in real terms. This compares more than favourably with average wages which have grown by approximately 50% after adjustment for inflation. However, these figures understate the increase as they also take into account non-executive directors. The number of NEDs has increased appreciably in the past two-and-a-half decades and their remuneration is generally below that of the executive director. Executives can expect to average £127,000, or if they are lucky enough to sit on the board of a FTSE-100 company, a spectacular £309,000, rising to a mean of £752,000 for the single highest paid director.
Interestingly, although much media attention has recently been directed at the 'fat cats' – notably Cedric Brown of British Gas – and their bloated pay packets, it is the boards of the larger companies which have been exercising relative restraint. The last pay increase for a typical FTSE director was 6.12%; that of his counterpart on the Stock Exchange as a whole grew by 10.4%.
As the graph detailing directors' ages shows, elevation to the board is unlikely to occur before the mid-40s. There is then a sharp peak - the single most common age is 48 – before another at 52; after this ages decline more gradually than they rose reflecting a number of 'elder statesmen' who retain seats well into their autumn years. Nonetheless, few directors (less than 2%) hold on to the reins of power beyond the age of 70. One surprise that does crop up is that the single oldest and youngest directorships are both held by women – of 25 and 91 respectively.
One of the more contentious issues company boards face is that of women, or rather their almost total absence. Robert Heller commented in the 1970 article that 'women are as rigorously excluded from Britain's boardrooms as non-communist candidates from Russian elections'. While the former Soviet Union has changed almost beyond recognition, the boardroom has yet to experience any comparable form of glasnost. Women now fill 3.7% of directorships, falling to 3.3% in the FTSE companies. This could be seen as a promising, if slow, start were it not for the non-executive status of the vast majority of these directorships. Looking through the top 100 companies, it is easy to walk away with the impression that it is considered desirable to have a token female on the board – in a non-executive capacity. In the FTSE100 women hold a mere 1% of executive directorships.
Education has been another fairly moribund area, with Oxford and Cambridge alumni retaining the lion's share. In 1970, of those listing an educational establishment 32% had attended Oxbridge, while 20% had been to other universities. For all directors, the figures are now 25% and 46% respectively, but this figure can be misleading. A typical director in the 1970 survey was born in 1914, and therefore attended university in the mid 1930s, when there were less than 20 such institutions. Today's director, if born in 1942, would have entered higher education in the 1960s when a massive expansion in the number of universities was taking place. Therefore the difference in figures reflects both a larger percentage entering higher education and a greater number of institutions to offset any decline in the Oxbridge share.
Twenty-five years ago public schools had a virtual 68e stranglehold, with 71% of directors listed as having a public school background. While the available data does not allow a percentage to be calculated for 1995, it is worth noting that 4% of those who detailed their education gave Eton as their alma mater and that a clutch of other top public schools can each claim over 1% of the total.
High office is not without its fringe benefits and it should come as no surprise that there are a substantial number of titles and honours to be found in boardrooms. The honoured 6% are, as might be expected, largely holders of CBEs and OBEs, with a smattering of honorary degrees. Those listing titles of some description number 926, or 6.5%. The most common title is a knighthood - they are regularly awarded for services to industry. There are also a smaller number of higher titles, reflecting either directors whose dedication has merited greater ennoblement, or members of the upper house who sit on boards in a non-executive capacity. One company can even boast a prince among its directors.
Although the individual directors themselves have remained by and large remarkably similar to their predecessors, the structure of the boards themselves has changed notably. The average boardroom of 25 years ago would be unlikely to find favour with the Cadbury Committee: 52% had a combined chairman and chief executive. This has now fallen to one in 10 for all quoted companies and one in 16 for the FTSE-100.
Other 'good governance' changes are also evident. Eighty four per cent of both FTSE and all quoted companies now have a non-executive chair, up from 21% in 1970. The proportion of non-executive directors on all boards has risen substantially. A quarter of a century ago, NEDs held more than one-third of the seats on only 40% of boards. This figure has now risen to 84% and 91% for quoted companies and the FTSE respectively. Indeed the non-executive director has become a ubiquitous boardroom feature: every FTSE company and 98% of all other companies can now claim at least one, and usually more.
What should interest the shareholder is what, if any, effect these boardroom changes have on company performance. Here there seem to be few clear patterns. The average company without non-executive directors turns in a performance which is uncannily similar to the company with over five NEDs, using measurements such as profit growth and earnings per share. And, as the recent furore would suggest, any link between directors' pay and company performance is a tenuous one. A browse through the total emoluments for various boards reveals striking pay disparities between otherwise similar companies.
On a more positive note all FTSE100 companies now have remuneration committees, as recommended by Cadbury. The Cadbury Committee's advice pertaining to the undesirability of a combined chairman and chief executive would seem well worth heeding, too. Where the roles are combined performance indicators such as earnings per share and return on capital employed tell a sorry tale, scoring below average on all counts. Yet the directors of this group of companies enjoyed pay increases, which at 12.4%, exceed the average by an appreciable margin. Clearly the quest for good governance has some way to go.
This profile, of course, covers many boardrooms which bear little relation to the patterns described, particularly among smaller listed companies. There are some companies where average directors' ages differ widely from the norm, particularly in the newer industries, where youth is an asset or, in older family firms, the reverse. Even some women, notably Anita Roddick, have very high profile roles, but these are exceptions rather than the rule. Generally, as companies get bigger, the exceptions decrease and the company conforms far more closely to the norm.
What, then, of the boardroom in 2020? It would be tempting to predict sweeping changes, but, if the past is any guide to the future, then stasis is more probable. One prediction with some chance of coming true is the increasing number of women. For, although the number of female directors does not support this, the progress made over the last quarter of a century in terms of movement up the corporate ladder does. The 'glass ceiling' has risen considerably since the last survey and there is a female foot - albeit a small one - in the door. Common sense dictates that general trends should eventually percolate up to the boards, and the next century should see a more significant number of women. By the same logic, it would be reasonable to expect some further dilution of the Oxbridge alumni, and a gradual drift towards a more egalitarian board.
But it should not be forgotten that privilege – and high achievement – do tend to appoint their own successors. Expect some changes, but not too many: the British boardroom is one place where the establishment male is still firmly in charge.
Behind the figures: 25 years on-board
1970/top 200 1995/all plcs 1995/FTSE-100
Average director's age 56 53 56
Average number per board 11 6.93 12.2
Average number of NEDs 3.4 3.51 6.11
Average board emoluments £171,000 £720,000 £2,990,000
Averge director's salary £11,000 £104,000 £248,000
Average percentage of women **1% 3.7% 3.3%
Chairman who is also chief exec 52% 10.7% 6%
Non-executive chairman 21% 84% 84%
Have NEDs holding 1/3-plus seats 40% 84% 91%
** much less than
Source: Hemmington Scott, publishers of The Price Waterhouse Corporate
EDUCATIONAL ROUTES TO THE TOP
1970/ top 200 1995/all plcs
Educated at Oxbridge 32% 25%
Educated at other universities 20% 46%
Professionally qualified 32% 37%
Attended business school 9% 2%
Hold outside directorships 43% 12%
Source: Hemmington Scott, publishers ofThe Price Waterhouse Corporate