Lack of diversity is undermining power and utilities’ performance
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 today by EY in Talent at the table: Index of women in P&U.
LONDON, June 3, 2014 – According to the report, 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.
Alison Kay, EY’s Global Leader, Power & Utilities, says:
“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.
“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.”
Women in Power & Utilities Index key findings
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
Alison Kay says: “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.”
Legislation needs strengthening to improve countries’ performance
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.
Alison Kay says: “The relatively strong showing of EMEA companies in the Women in P&U Index demonstrates the power of legislation to influence action.”
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.
Sector comparisons show industry in transition
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,” said Kay. “There is plenty we can learn from trailblazing companies in other sectors.”
Notes to editors
The Talent at the table: index of women in power and utilities asks the world’s top 100 global power and utility companies and ranks them according to the gender diversity of their boards and senior management teams. Copies of the report can be downloaded here ey.com/womeninutilities.
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SOURCE: Ernst & Young LLP