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Significant barriers remain in diversifying UK plc leadership

Author: ICAEW Insights

Published: 08 Nov 2022

FRC says greater transparency in decision making and promotion processes is needed as well as better monitoring, measurement and accountability.

Being overlooked for promotion, overt and covert racism, and the need to demonstrate higher performance standards are just some of the continuing barriers that stand in the way of individuals from minority ethnic groups reaching senior leadership positions at the UK’s top companies, new research shows.

The report by the Financial Reporting Council (FRC) Navigating barriers to senior leadership for people from minority ethnic groups in FTSE 100 and FTSE 250 companies calls for greater transparency in decision making and promotion processes as well as better monitoring, measurement and accountability. 

The report, conducted by a research team from Cranfield University and Delta Alpha Psi Services, found that few companies had solid race plans with clear objectives and specific actions linked to them. 

Despite public reporting of pay gaps, targets and performance metrics, researchers found “limited examples of companies reporting initiatives that would help them to meet their objectives”.

Researchers also found it difficult to unpick companies’ diversity initiatives because of “the tendency of companies to group diversity initiatives in their annual report means”, resulting in unclear outcomes between initiatives and specific diversity objectives. 

“Race and ethnicity data collection and monitoring should go beyond considering and grouping ‘ethnic minorities’, and instead explore the differences between the experiences and career outcomes of individuals from various ethnic groups,” according to the report.

Dr Deirdre Anderson, Director of the Gender, Leadership and Inclusion research centre at Cranfield University, and lead author of the report, said: “Our research shows that it’s essential for organisations to continue to build trust among their employees. Not only will this encourage self-identification against all diverse demographics, it will also provide accurate and complete data for monitoring progress against race and ethnic equality goals. This will help organisations expand on existing good practice and continue to dismantle the existing structural barriers towards greater equity.” 

Recommendations to broaden diversity

Initiatives that will help leaders at FTSE 100 and FTSE 250 companies broaden their boardroom diversity, according to interviewees at all levels, include more diverse interview panels, advertising in innovative ways – including use of social media – to target under-represented groups, and using a wider range of recruitment agencies for roles throughout the organisation. External networking, mentoring schemes and sponsoring are also examples of organisational initiatives that boost diversity.

Interviewees cited setting targets, monitoring and accountability as essential features for the continued push for diversity among senior leadership. The use of executive search consultants and widening the search to include those with less traditional careers were also cited as robust examples to promote individuals from Black and ethnic minority backgrounds.

The FRC also recommended reporting on the design and approach of data collection to share good practice and support other organisations in capturing this information.

Researchers found that the use of language was critical in changing organisational attitudes and cultures. For example, the phrase ‘Black, Asian and minority ethnic’, and its associated acronym ‘BAME’, is now widely considered “outdated and unsuitable”, and a “largely meaningless description of people”. 

Peter van Veen, Director of Corporate Governance, ICAEW, says: “If you've got a board of six, you don't want them all to be nodding at the same time. You want to have that challenge and that means having people on boards that understand your community and customer base who are able to provide those perspectives that keep you going in the right direction.

“This is a process of change, and change is uncomfortable. But I also think there is a certain reluctance to let others into what is a fairly cosy environment. It's the classic, ‘if it ain’t broke, don’t fix it’ attitude. But for many companies it is broken and they do need to fix it. The challenge is that a lot of boards don't quite know how to go about this in practice.” 

While 10.6% of people in the Indian ethnic group were in ‘manager’, ‘director’ or ‘senior official’ roles, the percentage of workers from the Black ethnic group employed in these senior-level roles is 4.6%, according to official figures. For comparison, this figure is 10.7% for White British workers. Compared with all other ethnic groups, Black workers are in the smallest proportion at senior levels. 

Under the Parker Review, at the end of 2021, 89 FTSE 100 companies had at least one person from a minority ethnic group on its board. This just misses the government’s target of ‘at least 1 by 21’. However, it shows continued progress. In 2016, only 47% of FTSE 100 companies had people from minority ethnic groups in their boardrooms. 

Still, the vast majority of the board positions held by those from minority ethnic groups are non-executive positions. Only six CEOs and 12 other executive directors across the FTSE 100 come from a minority ethnic group. There are even fewer chairs from a minority ethnic group background, with just three in the FTSE 100. 

Sir Jon Thompson, CEO of the FRC, said: “With the power of these personal insights and experiences that go beyond the data, I hope this report can help advance the conversation about how to successfully increase diversity in senior positions on boards and create sustainable pipelines of diverse talent to fill both executive and non-executive roles.”

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