Balfour Beatty shareholders oppose lack of board diversity

Dive Brief:

In a sign of the increased focus on diversity and inclusion among publicly traded construction companies' boards, 22% of Balfour Beatty's shareholders opposed the re-appointment of outgoing chairman Philip Aiken as a board member amid diversity concerns. There are currently two women and six men on the firm's board.
The London-based contractor announced last week that Charles Allen, former ITV and EMI Music executive, would succeed Aiken as chairman. The 78% vote in favor of Aiken means he will remain on the board, but the relatively low margin of approval — all other resolutions passed by 93% or more — reflects the increased dissatisfaction among investors about a lack of diversity among corporations' top ranks.
After the results, the company issued a statement via the London Stock Exchange acknowledging the work it has to do to hit its diversity goals. "The board notes the result of this resolution which we understand has arisen due to concerns about board diversity," the statement read. "We engaged widely with shareholders during the year and will continue to do so. We will publish an update on this engagement, in accordance with the U.K. Corporate Governance Code, within six months."

Dive Insight:

The tepid endorsement of Aiken came after the influential Institutional Shareholder Services proxy group advised shareholders to vote against his re-appointment, according to U.K.-based Construction News. ISS based that recommendation on the fact that women make up only 25% of Balfour Beatty's board, below the 33% recommendation of the UK's Hampton-Alexander Review, an independent initiative launched in 2016 to increase women in leadership roles of Financial Times Stock Exchange 350 Companies.

In its 2021 annual report, Balfour Beatty conceded that it hadn't reached those benchmarks.

"The board recognises that it does not currently meet the target set by the Hampton-Alexander Review and will aim to enhance the diversity of its board through ongoing succession planning," read the report, which was released in April.

While Allen's May 13 appointment didn't increase the number of women on the board, the U.K.'s Evening Standard newspaper noted that he regularly appears on lists of the country’s most influential gay people and remarked that his "appointment will mark a welcome element of LGBT diversity in the construction industry."

Still, Balfour Beatty didn't meet the 33% benchmark for women across its broader leadership ranks, either, according to Construction News. Senior leadership in the company includes 33 women and 91 men, or a 26.6% female representation.

The dust-up in the usually staid investment circles of the U.K. could be a preface for pressures on U.S. contractors to come. While environmental, social and governance investing and its corresponding focus on diversity originally made inroads among European investment funds, it has quickly grown in the United States as well.

Major U.S. contractors including AECOM, Jacobs and Webcor have launched ESG initiatives. And in the wake of George Floyd's murder at the hands of Minneapolis police last year, hundreds of construction companies signed onto the Associated General Contractors of America's Culture of CARE initiative, which promotes diversity and inclusion in the workplace.