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Parker Review sets new goals to boost DE&I progress

Author: ICAEW Insights

Published: 23 Mar 2023

FTSE companies have made significant strides with ethnic diversity on boards, according to the Parker Review – but deeper details show there’s still a long way to go.

Top UK companies still have work to do on ethnic minority composition at board level, despite meeting the primary target set out in the Parker Review – one of the most prominent diversity, equity and inclusion (DE&I) initiatives of the past decade.

Set up in 2016, the Review published a landmark report the following year, calling for each board in the FTSE 100 to have at least one director of ethnic heritage by 2021, and each board in the FTSE 250 to meet the same goal by 2024.

Following a recent voluntary census of relevant organisations, the Review announced on 13 March via its sponsor EY that 96 companies had fulfilled the FTSE 100 target, up from 89 last year, with 49 of them having appointed more than one minority-ethnic director. Indeed, there are now 178 minority ethnic board directors in the FTSE 100.

Meanwhile, FTSE 250 companies are making progress on their 2024 goal, with 67% of respondents hitting the Review’s target – up from 55% last year. The Review is now moving into a new phase to encourage further progress.

Fresh objectives

With just three FTSE 100 companies to go – one having exited the list through an acquisition – Parker Review Committee Chair David Tyler announced in the EY statement that the target set in 2017 “has effectively now been reached”. As such, the Review has launched two, fresh targets, to be achieved by 1 December 2027:

  1. Each FTSE 350 company has been asked to set a percentage goal for senior management positions that will be occupied by ethnic minority executives by that date. (Given wide variations in the population share of ethnic minorities in different parts of the UK, the Review acknowledges that there can be no ‘one size fits all’ target percentage for ethnic-minority executives in senior management.)
  2. Each of the UK’s 50 largest, private (non-listed) companies has been asked to have at least one ethnic minority director on its main board by 1 December 2027. As per the FTSE 350, each company has also been asked to set a target for the percentage of ethnic minority executives within its senior management team.

The Parker update also strongly encourages companies within the scope of those goals to describe in their annual reports the management development plans they are putting in place to help create diverse, inclusive talent pipelines into senior roles.

Brain drain

Despite the positive headline results, more granular analysis indicates that significant challenges remain. Analysis by DE&I-focused talent advisory firm Green Park found that of the 178 ethnic minority board directors in the FTSE 100, only 63 (35%) are British passport holders.

Meanwhile, of the 356 ethnic minority directors in the FTSE 350, only 65 occupy Chair, CEO or CFO roles and other directorships – meaning the majority are non-executive directors. Green Park’s analysis also suggests little progress for Black professionals since increased corporate focus on that demographic following the murder of George Floyd. Black leaders hold 15% of ethnic minority director positions in the FTSE 350, while Asian directors hold 58%.

Green Park CEO Raj Tulsiani describes corporate progress on the Parker Review’s initial goals as “a big step forward – but not the end of the race”.

He tells Insights: “A couple of years before the George Floyd murder, we began tracking the number of Black-heritage, British passport holders at board level, or poised for board roles, in the FTSE 100. We found – and are still finding – that the UK is effectively a net exporter of Black-British leadership talent.

“So, there’s a Black brain drain: top companies have decided that it’s easier to bring in ethnic minority talent through global searches than to build people up through their own senior management cadres.”

Tactical issue

One major problem, Tulsiani stresses, is a misunderstanding on the demand side of the factors that candidates are weighing up in their decision-making.

“Just because you open your door doesn’t mean that people will walk in,” he says. “In the past decade, thousands of our ethnic minority placement engagements have shown us that candidates are very wary of tokenism – and of less-than-transparent processes. Candidates won’t suddenly befriend the very headhunters or HR heads who’ve been saying no to them for 20 years. Making people flavour of the month doesn’t guarantee reciprocation.

“Candidates don’t want to be appointed because of their ethnicity, but their capability and because there’s a genuine relationship between what their personal brand and expertise stand for and what the business that’s approached them needs to get done,” Tulsiani adds.

Recent research carried out through campaigning group Race Equality Matters – co-founded by Tulsiani – found that 60% of participants said that ethnic minority executives are still doing most of the heavy lifting around promoting racial equality in their companies.

“The Parker Review’s achievements are a really great news story,” Tulsiani says. “But the next step is: how do we help individuals who are in board roles with companies that want to make a difference harness the governance of their positions to create meaningful cultural and behavioural change? In other words, change that’s sustainable and not reliant on ethnic minorities to support, when we generally comprise just 10% to 20% of our workforces. That question presents a huge systemic and tactical issue.”

ICAEW Head of Diversity and Inclusion Yelena Travis-Powell says: “It is enthusing to see that some tangible progress has been made within the FTSE 350 against the targets set out by the Parker Review. FTSE leaders should now focus their attention on succession planning initiatives at every level, to ensure that opportunities are not only equal, but also equitable – and that the pipeline of diverse talent towards board and other senior roles will provide a consistent flow, stemming from sustained efforts.”

Travis-Powell adds: “Practical measures may include determining clear, transparent career pathways and establishing supportive application and interviewing processes, plus identifying the number of high potentials against the number of key roles and setting appropriate, corresponding targets. Of course, that means providing complementary support and lots of activity around engagement to mitigate the risk of attrition while on this journey.”

Read the 2023 Parker Review update in full

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