The CIPD is urging business leaders to have board-level HR representation or input to ensure there is the necessary people expertise to develop positive corporate cultures and manage workforce risks such as sexual harassment.

This is the key message in a new report from the CIPD, the professional body for HR and people development, ‘The value of people expertise on corporate boards’. It found just a quarter (25%) of FTSE 350 firms have a board member (both executive and non-executive) with an HR background, while only 2% have an HR director as an executive board member.

The report is released as the Treasury Committee launches an inquiry into sexism in the City, exploring what role firms, the Government and regulators should play in combatting sexual harassment and misogyny.

It finds that there is a ‘people insight deficit’ at board level in many firms. Many chairs and senior independent directors tend to have financial rather than HR backgrounds. There is also a lack of HR representation on remuneration committees (23%) and nomination committees (20%), despite these both being focused on the key people issues of reward and talent.

The report suggests this lack of HR representation undermines firms’ corporate governance, particularly given most questions on board effectiveness from the Financial Reporting Council concern people issues.

This is reflected in the CIPD’s report, with chief people officers noting some common problems or knowledge gaps among non-HR board members, including:

  • a lack of in-depth understanding of people issues
  • an overfocus on the financial skillset
  • an ‘overenthusiasm’ around employee engagement, leading to interference with management
  • a lack of emotional intelligence
  • a lack of awareness and discomfort around EDI issues.  

There is an increasing need for boards to understand and manage key people-related challenges and risks. These include improving equality, diversity and inclusion and workforce health, addressing skills shortages, adoption of AI and automation and the need to transition to net zero operations.
In response, the CIPD is calling for the Financial Reporting Council to consider refinements to the UK Corporate Governance Code* and accompanying guidance. Specifically, boards should be made up of professionals with a variety of expertise and should reflect the growing need for greater input, support and advice from senior-level HR practitioners on critical workforce issues.

Susannah Haan, senior corporate governance adviser at the CIPD, the professional body for HR and people development, comments:

“It’s often said that people are a company’s greatest asset, but the make-up of boards simply doesn’t reflect this at the moment. Effective boards require a diverse range of skills and perspectives, so it’s concerning to see how few boards have people with HR expertise. This lack of people insight can lead boards to overlook people risks and thus to significant reputational damage.

“It’s essential that UK boards ensure they have the right mix of expertise to successfully navigate the challenges and opportunities facing organisations, particularly with growing expectations for competence around people issues. 
“Professionals at board level with a deep understanding of the complexities of managing and developing talent are essential to nurture the right culture for an engaged workforce that can deliver an organisation’s strategic priorities and fuel growth in the UK economy. 
“It’s clear there’s a ‘people insight deficit’ on UK boards. There needs to be a much stronger emphasis on people and HR expertise if businesses want to survive and grow in a changing world of work, and respond effectively to external challenges.” 
The CIPD’s report also notes that a ‘people insight deficit’ means organisations may fail to fully recognise the value of their workforces or manage people-related risks effectively. This is often reflected by falling levels of investment in workforce training and plays out in disappointing levels of productivity growth in the UK. 

Notes to editors

  • The CIPD examined the career histories of the boards of all FTSE 350 companies required to publish a pay ratio disclosure (meaning they have more than 250 UK employees and are thus categorised as a large business in the UK). We looked specifically for professional expertise and experience in people management roles prior to assuming board positions, as well as professional backgrounds in other fields, for comparative purposes.  
  • As we only viewed the profiles of individual board members on company websites, it may be that the analysis slightly underestimates the extent of board-level representation of the HR profession; for example, board members may have people management experience that isn’t mentioned in their profile. However, it is unlikely that meaningful HR experience would not be mentioned in a paragraph summarising the significant parts of an individual’s career history, and if it was omitted, that would be somewhat revealing of the skills the company considers relevant at board level.
  • The research was limited to the FTSE 350, because the process of identifying the companies was comparatively uncomplicated and the career histories of their board members are disclosed in a relatively consistent fashion. However, there are good grounds to think that it is illustrative (even if not entirely representative) of major employers more generally.
  • Note: a company board is made up of both executive directors and non-executive directors. Typically, the executive team comprises senior managers (CEO, chief financial officer, etc), while non-executive directors are part-time and meet occasionally. 
  • *The Financial Reporting Council has launched a consultation on the UK Corporate Governance code to identify areas where it may be strengthened.

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