Genuine engagement needed to tackle lack of ethnic diversity at board level

A progress report published this month has criticised FTSE 100 companies for doing too little to address the lack of ethnic diversity at senior levels after admitting progress has been slower than hoped.

The report published by Sir John Parker, EY and the Department of Business, Energy & Industrial Strategy (BEIS) states that the current pace of change means that boardroom ethnicity targets set in 2016 will not be met. Too many people remain complacent that change will come about naturally through the passage of time, it warns.

The 2020 Parker Review shows that 37% of FTSE 100 companies surveyed still have no ethnic minority representation on their boards, even though its first report published in 2017 set a voluntary target for all FTSE 100 boards to have at least one director from an ethnic minority background by 2021. Since then, 11 additional FTSE 100 companies now have an ethnic minority director on their board.

In total, only 98 out of 868 directors across the FTSE 100 disclosed their ethnicity. Due to GDPR restrictions introduced in May 2018, the report is based on voluntary data submissions.

Sir John Parker, former chairman of Anglo American plc, said companies were missing out on the undeniable benefits that diverse leadership provides. “Ethnic diversity needs to be given the same level of board room focus that finally led to increasing female representation on boards, which has seen real progress in recent years.”

In addition to reiterating the recommendations set out in the 2017 report, new recommendations focus on measuring board-level diversity and helping to build a pipeline of board-ready candidates. They include disclosing diversity metrics and progress and identifying targeted programmes and initiatives that can help high-performing BAME individuals reach board level.

Arun Batra, EY Partner, CEO of the National Equality Standard and adviser to the Parker Review said: “Businesses need to continue to challenge traditional ways of working and legacy issues, and really investigate the talent that they have available in their business.”

Companies that want to avoid reputational damage may feel more inclined to take these latest Parker Review recommendations into account, says Paul Holcroft, Associate Director at employment law and HR consultancy Croner. “By outlining an ethnicity target the company is committed to achieving, employers can encourage skilled individuals to apply to join the organisation who may otherwise not have considered it as an attractive option.”

However, targets may not work for all companies if not overseen correctly, Holcroft added. “Some sectors may traditionally not attract many individuals from certain backgrounds and implementing an ethnicity quota in this situation could potentially not be the best approach. Here, it may be better to explore why the company is not seen as a viable option for them and take steps to work against this, such as targeted marketing campaigns aimed at these minorities.”

2020 Parker Review recommendations

Engage - FTSE 350 companies must engage constructively on this issue and report on the ethnic diversity of their boards.

Report – Companies should report fully on their ethnic diversity policies and activities as part of their reporting requirements and in compliance with the Corporate Governance Code, ideally covering board appointment processes and the work of the nomination committee.

Recruit - Executive recruiters should be much more proactive in “marketing” highly talented ethnic minority candidates and in applying their voluntary code of conduct.

Develop - A pool of high potential, ethnic minority leaders and senior managers should be developed as part of a cross-sector sponsorship/mentoring programme sponsored by CEOs across the FTSE 350.

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