The FINANCIAL — With just 4% of executive board positions at the world’s largest 100 power and utilities (P&U) companies held by women, lack of diversity is undermining business performance, according to new research published by EY in Talent at the table: Index of women in P&U.
The average return on equity (ROE) for the world’s top power and utility companies with high diversity scores is 7.7%, compared with only 4.5% for those with lower diversity scores. As an industry, power and utility companies have also under-performed global equity markets on price by two thirds over the past five years, according to the report.
“Diverse boards deliver for companies; but the pace of change in P&U is out-distancing the pace of change in the boardroom. Having just 4% of executive positions in P&U held by women is not enough. You can’t hear 4% – they have no voice," Alison Kay, EY’s Global Leader, Power & Utilities, said.
“We believe that the importance of having diversity in the senior management team is being overlooked by the industry at a time when it needs new thinking and new approaches to resolve the energy trilemma: how to provide energy that is available, affordable and environmentally sustainable, all at the same time,” she added.
EY’s Women in P&U Index analyzes the top 100 companies in the sector and ranks them by the number of women on the board of the headquartered company and on the senior management team. The findings reveal that women account for just:
4% of board executives
18% of non-executive directors
15% of board members (both executive and non-executive)
12% of the senior management teams
“We recognize that there are many factors that influence performance, but there is no doubt of the key role that diversity plays. We are disappointed by the results of the index; if not surprised,” Alison Kay said.
Most countries are still working towards the targets set by government for gender diversity in the boardroom. EY’s research shows that EMEA is the region that performs best in terms of boardroom diversity, accounting for 9 of the countries in the top 20. North America follows with six and the Asia-Pacific region with five.
“The relatively strong showing of EMEA companies in the Women in P&U Index demonstrates the power of legislation to influence action,” Alison Kay said.
Norway, for example, led the world in mandating a 40% quota on boards in 2003, which took effect in 2006. Finland has had legislation in place promoting the presence of women on boards since 2005. These countries are a good five to seven years ahead of the majority of countries whose legislation we assessed and top the global rankings for the representation of women on boards, according to the report.
Across all industries, companies are struggling to meet the 25% to 40% targets set by governments. Although P&U fares better for gender diversity than other infrastructure-specific industries such as oil and gas and mining, it lags behind consumer services and consumer goods.
“The position of P&U in the middle of the sector ranking reflects its status as an industry in transition – from engineering-led power generator/distributors to consumer-focused service companies. There is plenty we can learn from trailblazing companies in other sectors,” said Kay.
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